Court headnote

Begley v. Imperial Bank of Canada
Collection
Supreme Court Judgments
Date
1934-12-21
Report
[1935] SCR 89
Judges
Duff, Lyman Poore; Cannon, Lawrence Arthur Dumoulin; Crocket, Oswald Smith; Hughes, Frank Joseph; Maclean
On appeal from
Alberta
Subjects
Agency
Decision Content
Supreme Court of Canada
Begley v. Imperial Bank of Canada, [1935] S.C.R. 89
Date: 1934-12-21
Mary Victoria Begley (Plaintiff) Appellant;
and
Imperial. Bank of Canada (Defendant) Respondent
1934: October 11; 1934: December 21
Present:—Duff C.J. and Cannon, Crocket and Hughes, JJ. and Maclean J. ad hoc.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ALBERTA
Principal and agent—Banks and banking—Power of attorney—Exercise of for agent's own benefit—Agent paying his own debt to bank with cheque drawn on principal's account— Estoppel—Acquiescence—Ratification—Conduct of principal. The appellant, a widow, who had a savings account with the respondent bank, gave a power of attorney to one M. authorizing him "for me and in my name to draw and sign cheques on the said bank * * *" M. was indebted to the respondent bank and on being pressed for payment told the respondent's local manager that he "could borrow it from Mrs. Begley", the appellant. Shortly thereafter, after the appellant had left on a visit to Ontario, M. told the bank's accountant, who was aware of what had been said previously between M. and the manager, that he, M., wished to pay off his debt. Under M.'s instructions, the accountant made out a promissory note payable to the appellant on demand which M. signed for the amount of his debt to the bank. M. thereupon gave the bank a cheque on the appellant's account, signed by him as her attorney. The cheque was charged up against the appellant's account and M.'s indebtedness to the bank was cancelled, the note was left with the bank. The note was renewed twice by M. on July 31st, 1931, and in September, 1932. Alleging that she had not given M. authority to borrow or use her money for his own use, the appellant sued the bank respondent on December 29th, 1932. The trial judge maintained the action; but the Appellate Division reversed his judgment on the ground that the appellant's subsequent conduct in dealing with M. and her silence towards the bank constituted a complete estoppel.
Held, in accord with the judgment of the Appellate Division ([1934] 1 W.W.R. 689) and the trial judge, that the respondent bank had no right as against the appellant to retain the monies so paid over to it by M.; but
Held, reversing the judgment of the Appellate Division, Cannon J. dissenting, that, according to the facts and circumstances of this case, the appellant's conduct did not constitute estoppel or ratification.
Per Cannon J. (dissenting):—Both on the ground of ratification and of estoppel, the respondent bank's defense is well founded, according to the facts of the case.
APPEAL from the judgment of the Appellate Division of the Supreme Court of Alberta[1], reversing the judgment of the trial judge, Boyle J., and dismissing the appellant's action. The material facts of the case and the questions at issue are stated in the judgments now reported.
H. G. Nolan for the appellant.
E. K. Williams K.C. for the respondent.
The judgment of Duff C.J. and Crocket and Hughes JJ. and of Maclean J. ad hoc was delivered by
DUFF C.J.—This appeal involves a controversy concerning the rights of the appellant against the respondent bank in respect of certain moneys of the appellant paid to the bank by one McElroy, who at the time held a power of attorney from the appellant, in liquidation of his debt to the bank.
The payment was made on the 29th of June, 1929. The appellant had been a depositor and had had a savings account with the bank since 1918. At the time of the transaction we have to consider, she was a widow, her husband having died in the previous December. She had been told by her husband, just before his last illness, that in matters of business, she should seek the assistance of McElroy. They both recognized that she would require assistance, because she was ill, suffering, as she afterwards learned, from an "inward goitre." Accordingly, in January, McElroy was appointed administrator of the husband's estate, and one Moyer, McElroy's solicitor, acted as solicitor in the business of administration.
On the 21st of June, 1929, the appellant, McElroy and Moyer were in the bank, saw the manager and on that occasion, the sum of $13,000, which had been realized from the estate, was transferred from the administrator's account to the personal savings account of the appellant.
McElroy was a customer of the bank and for some years his indebtedness to the bank had been heavy; it appears that from 1924 to 1929 his "direct liability" fluctuated from fourteen to eighteen thousand dollars, while he was under an "indirect liability" for something like fifteen thousand dollars, arising out of a mortgage held by the bank as collateral security.
Weaver, the local manager of the bank of Calgary, who was called as a witness at the trial, states that, since early in 1925, he, as manager of the branch, had been trying to get McElroy to discharge his liability. In December 1928, his indirect liability was $14,800 and his direct liability $18,690.
Some of the letters which passed between Weaver and the western head office at Winnipeg, and the head office at Toronto, are in evidence. On the 20th of December, 1927, the assistant general manager at Winnipeg, writing to Weaver, says that he is concerned about McElroy's account, and comments sharply upon a remark of McElroy's, reported by Weaver, about a "purchase of May wheat," as indicating that McElroy was gambling in wheat. This, Weaver was informed, was a very serious matter and he was directed "to get at the situation at once."
On the 23rd of November, 1928, the assistant general manager at Toronto writes to the western superintendent at Winnipeg expressing his dissatisfaction with the information in his possession respecting McElroy's account, which showed a "direct" indebtedness at that time, apparently, of over $15,000. He complains that a suggestion that McElroy was going "to place a mortgage" in order to repay the bank was vague and appeared "to be drifting."
Towards the end of December, McElroy succeeded in raising a loan of $13,000 odd, by mortgage upon his lands, reducing his direct liability to the bank to $5,289. On the 8th of January, the assistant general manager writes:
You do not tell us how McElroy is going to pay the $5,289. Has he got sufficient money from the sale of grain and cattle to provide for it?
Weaver replies on the 15th of January informing the assistant general manager that McElroy has not sufficient grain and cattle to pay the balance owing the bank, but that he has decided "to sell out" and is negotiating with one Herron for that purpose.
McElroy's direct liability was increased to $7,296 by the 25th of March, 1929. On the following day a deposit was made reducing it to $3,423. On the 29th of June it had been increased to $8,518. By moneys transferred from the appellant's account to McElroy's account, it was paid in full on that day—the first time for at least five years when McElroy was free of debt to the bank.
In the meantime, Weaver, stimulated by the head office, had been pressing McElroy for the payment of his indebtedness. Weaver states that at the end of April, 1929, McElroy told him that if the deal with Herron did not materialize, he could borrow the money from Mrs. Begley.
Again, on the 7th of June, Weaver says, he asked McElroy "in regard to paying the loan," and McElroy, he avers, told him that Mrs. Begley "had not yet got back from the states," and that "he would make arrangements with her when she came back."
The bank adduced this testimony by Chambers, the assistant manager:
Q. Prior to the 29th of June had you any reason to anticipate the withdrawal of any of the funds from Mrs. Begley's savings account and the same to be applied in satisfaction of McElroy's indebtedness to the bank.—A. Yes.
Q. Where did you get your information from?—A. From the correspondence between the branch manager and head office.
Q. Have you any duty in connection with that correspondence.—A. I have to read every letter that goes out of the office the day that it goes out.
Q. So you knew some time I take it before, or tell me whether you knew before the 29th of June that some transaction of the kind contemplated was going to take place—A. Yes, I knew it on, I believe the date is May 14th.
Q. In May some time.—A. Yes.
The appellant, who had gone in January to stay with her sister in Spokane, returned to Calgary on the 19th of June. On the 21st, with McElroy and Moyer, she visited the bank and had a short conversation with Weaver, and, apparently, on this occasion, $13,000, the sum realized from the husband's estate, was transferred to her personal account. She visited the bank again on the 24th of June, and still again on the 25th, when she arranged with the assistant manager Chambers for the transfer of some money in Hamilton, Ontario, where she was about to pay a visit, intending to leave Calgary, as she did, on the following day, the 26th. It was three days after her departure that McElroy, purporting to act under a power of attorney in the bank's printed form, transferred from the appellant's savings account to his own account, a sum equal to his debt to the bank for the purpose of paying that debt which was so applied.
McElroy was not called as a witness, and the only direct evidence as to what occurred on the 29th of June, 1929, is that of the assistant manager, Chambers. In examination-in-chief he says:
Q. Now will you narrate in your own language, Mr. Chambers, the exact transaction as you recall it.—A. On June 29th, which was Saturday, just at the closing of the bank, Mr. McElroy came in. Q. That would be at 12 o'clock I suppose?—A. Yes.
Q. The bank closes on Saturdays at 12?—A. Yes. He came to me and said * * *
Mr. Shaw: You have no objection to these conversations, just a moment please.
Mr. Nolan: All right, Mr. Shaw.
Q. Mr. Shaw: Well now, Mr. Chambers?—A. He said, "I wish to pay off my liability to the bank, will you please figure up how much it is I owe you." I then figured up his liability which amounted to $8,518.78. He then said I am going to borrow sufficient money from Mrs. Begley's account to pay this liability. Will you kindly make me out a note payable to Mrs. Begley. I said, "How long, when will the note be payable?" and he said, "On demand."
Q. The Court: What is that?—A. The note would be payable on demand. I asked him at what rate of interest was to be added to the note and he said, Seven per cent." I made out this note and handed it to him and he signed it. He then said, "Will you please make me out a cheque" which I did, a cheque payable to J. W. McElroy for $8,500 which he signed "Victoria Begley per J. W. McElroy, Attorney."
Q. Is the handwriting of the note and the cheque yours excepting the signature?—A. Yes.
* * *
Q. Then what happened?—A. He then said, "I will have to put this cheque to my credit." I said, "I will make out a deposit slip," and I made out this deposit slip for, put on the $8,500 and I said, "This will not be sufficient to clean up your liability in full and he gave a further cheque for $18.78 which I added to the $8,500 deposit, made out the deposit for his account
Q. What did you do? All these documents were turned over to you, that is you had the cheque—A. I gave them all to Mr. McElroy to sign and when they were all made out and signed by him he handed them back to me.
Q. Yes, what did you do with them?—A. I took the cheque and the note, the cheque and the deposit slip and gave them to the paying teller. I put them in the paying tellers slide.
Q. That would be, your office is at the inner entrance to the bank? —A. Yes.
Q. So you simply walked down behind the counter I suppose?—A. Behind the counter and put them into the paying teller's slide. The note I put in my basket.
Before commenting upon this proceeding, it will be convenient to turn to the meeting which took place at Moyer's office between the appellant, McElroy and Moyer on the 24th of June. On that occasion the appellant executed the power of attorney, in the printed form furnished by the bank, upon which the bank relies in this litigation. The appellant remembers nothing about the power of attorney, and Moyer says it was not read over to her or explained to her. It was understood by all three, the appellant and Moyer agree, that the appellant's object in going to Moyer's office with McElroy, who accompanied her, was to make arrangements for the investment of the money in her savings account; which, as already mentioned, she had received from her husband's estate. She says that she then "appointed McElroy" as her agent to invest her money, and it was arranged, she says, and with this Moyer agrees, and there is no dispute about it, that McElroy was to try to get investments at a higher rate of interest than the ordinary bank rate on deposits; and that, in the meantime, her money was to be invested in government bonds. It was agreed that any other investments were to be subject to Moyer's approval. Moyer says this:
Q. Did you read this document exhibit "4" over to Mrs. Begley?—
A. No.
Q. Did you explain it to her?—A. No.
Q. Why didn't you?—A. Well, I cannot say, Mr. Nolan. She understood that the power of attorney was being given on the bank account and it was in keeping with the instructions she had given to vest authority in McElroy to operate the account for the purpose of investments she had sanctioned or agreed to.
Q. All right then, are you saying to me that finally instructions were given that for the time being at least the investment was to be in Government bonds?—A. Yes.
Q. Until such time as selected securities could be obtained, to which your approval must be given?—A. That is right, and subject to the retention of some reasonable amount in the account.
Q. For current expenses?—A. That is right.
The appellant declares most explicitly that at no time did she agree to lend money to McElroy. But the evidence goes further, and, as it is important, it will be better, perhaps, to quote a passage from it verbatim. The incident mentioned in the passage was on the occasion to which we have referred, on the 24th of June; when, as Moyer says, the final instructions were that "for the time being at least the investment was to be in government bonds." The appellant says:
* * * Mr. McElroy asked me in an undertone voice if I would not let him have some money where he would pay me seven per cent interest, where if I put it out in Government Bonds, as I asked him, he said I would only get four or four and a half or something and I ignored it, I never let on I heard him say it at all. I said I wanted my money put out in Government bonds.
Q. That was on Monday the 24th, was it, of June. Was it, Mrs. Begley.—A. Yes.
Five days after this meeting, at which Moyer deposes, the appellant declared "she trusted" McElroy and himself "to do the right thing, and she was not going to worry about it at all "—five days after this interview at which these instructions were given, McElroy entering the Imperial Bank, declared to the assistant manager, according to the evidence of the latter, that he was going to pay off his debt to the bank; that, in order to do so, he was going to borrow from Mrs. Begley, and the assistant manager having drawn a cheque upon the appellant's account payable to McElroy's order, he forthwith attached the signature "Victoria Begley per J. W. McElroy, attorney."
In addition to the sum thus withdrawn on the 29th of June, McElroy, within the succeeding four months and a half withdrew something like $3,000, professing to act under his power of attorney, of which $2,500 seems to have been applied for his own purposes, and without Moyer's knowledge; the remaining $500 was advanced to Moyer personally as a loan.
The majority of the Appellate Division seem to have thought that the evidence left some doubt upon the point of the fraudulent character of McElroy's conduct. I regret to say I am unable to share, what I cannot help regarding, if I may say so with the greatest respect, as the somewhat indulgent view, which the learned judges consider to be admissible, of the effect of the evidence. It seems to have been thought that the appellant's attitude, in ignoring, to use her own expression, McElroy's request, might have been interpreted by McElroy as "silence" importing "consent."
The evidence of Moyer and the appellant is quite unmistakable that the power of attorney was to be used for the purpose of investing the appellant's money in accordance with her instructions. McElroy could not possibly have misconstrued those instructions in the sense suggested. If he had done so, that is to say, if he had really believed that the appellant was acceding to his request, and agreeing to give him a loan, the matter would not have been allowed to rest there; he would have had the loan effected and the business closed before the appellant left Calgary on her visit to Ontario. McElroy was a man of experience in business, and could not have failed to realize that if he delayed the matter until after the appellant's departure, and then made use of his power of attorney in order to effect a loan to himself, without further communication of any sort with the appellant, he must expose himself to the gravest risk of misunderstanding and suspicion. No honest intelligent man of business experience would have behaved so. The judges of the Appellate Division, as well as the trial judge, have concurred in the view that the bank had no right, as against the appellant, to retain the moneys paid over by McElroy on the 29th of June. They all agree that if the appellant had, on becoming aware of what had occurred, demanded repayment, the bank could not have successfully resisted her demand. They agreed that the transaction in its character and in the circumstances attending it, was so far outside the ordinary course of business as to put the bank upon enquiry, and that the bank, having acted without the slightest investigation, not even so much as a question addressed to McElroy, could not, if such a demand had been made, have been permitted to keep the money.
The majority of the Appellate Division hold that the appellant is now estopped by her conduct from asserting her claim, and think, with some hesitation, that she had ratified McElroy's act in withdrawing the money from her account as a loan to himself; and that this involved a ratification also of his act in employing the proceeds to pay his debt to the bank.
With the greatest respect, I have been unable to satisfy myself that the bank has established these defences; but before considering them it is worth while, I think, to make one or two observations upon the transaction of the 29th of June.
As the trial judge observes, none knew better than the officials of the bank the financial pressure to which McElroy was subject. Apparently, he had unsuccessfully essayed every expedient, save resort to the appellant, for the purpose of providing himself with funds in order to satisfy the just and urgent demand of the bank.
On behalf of the bank, it is said, and the evidence already mentioned was offered in support of it, that they had been looking forward to payment by McElroy out of the proceeds of a loan which he expected to obtain from the appellant. He seems, as we have seen, to have informed the manager in April that he could borrow from the appellant. Then, as we have also seen, on the 7th of June, again, the manager tells us, he said that on the appellant's return "he would make arrangements with her."
It must be assumed that the local officials of the bank had more than an ordinary interest in these expectations communicated to them by McElroy; information regarding them had, apparently, been communicated to the head office. McElroy's account, as administrator of the estate of the appellant's husband, seems to have been kept in the bank. Indeed, the evidence suggests that, during her absence in Spokane, the manager had been permitting the appellant to draw upon the moneys of the estate or upon the bank on the security of her interest in the estate.
It may properly be inferred that before the appellant returned to Calgary on the 19th of June, the officials of the bank were fully cognisant of the amount of the funds which would pass into her possession from the estate. They must have realized that to give a loan of $8,500 to a man in McElroy's circumstances without security, out of a savings account deposit of $13,000, could be no light thing for a woman circumstanced as the appellant was. It is idle to suggest that their minds did not advert to such matters. The payment of McElroy's loan was a matter of no slight moment to them. It would require an unusual degree of credulity to accept the hypothesis that the probabilities of McElroy succeeding in obtaining such a loan, and as incidental thereto the financial situation of the appellant, were not of interest and concern to them. Such being the circumstances, it is impossible to suppose that they did not look forward to receiving some information from McElroy after the appellant's return, touching the result of his endeavours to obtain the assistance of the appellant in relieving him from his embarrasments.
I cannot think it could have entered their minds antecedently that McElroy would endeavour to get rid of his difficulties by making use of a general authority under a power of attorney in the bank form without the specific consent of the appellant to a loan; but when McElroy proposed (after the appellant had returned to Calgary, and having remained there a week, going in and out of the bank, and had gone away for a lengthy visit in Ontario, and no communication had been received by the bank touching the success of his endeavours to arrange the loan he had been expecting to secure) that he should employ the power of attorney lodged by the appellant with the bank in order to effect an unsecured loan to himself of $8,500, out of the appellant's balance of $13,000, I am un- able to resist the conclusion that the suspicion of any sensible person in the situation of the bank officials, with all the knowledge they possessed, and interested as they were, must have been aroused. Neither the manager nor the assistant manager says he believed a loan had been obtained, or that he did not regard the circumstances as suspicious The manager, indeed, puts his point of view very clearly. In direct examination he says:
Q. Mr. Weaver, you have suggested that the cheque, the $8,500 cheque, first came to your attention in January, 1929, and at the time of the bank inspection, you observed the form of it at that particular time, did you? —A. Yes, that it was 30.
Q. Yes, 1930?—A. Yes.
Q. Now what did you do following that?—A. When I found it was signed under power of attorney, I inspected the power of attorney which was on file in the office and had it filed away again, that is all I did.
Q. You just investigated to find out whether or not there was a power of attorney?—A. Yes, and the power of attorney, so far as I knew, was in proper form.
Q. Had you known anything about this transaction previously, I am talking now about the cheque, the $8,500 cheque and the note?—A. Will you please be a little more clear?
Q. Here you see, Mr. Weaver, a cheque signed by, under power of attorney, now what did you do in connection with that, that put you on your inquiry did it?—A. I only inquired at the time if there was a power of attorney and if that power of attorney was in order and properly recorded and that is all I did, I did not consider there was anything further necessary.
Q. No, the Court will not allow that conversation, but what I want to know is, did you have any other source of information other than Chambers with respect to this matter?—A. I may be very stupid in this question but I do not understand exactly what you wish to get from me. I can only explain that Mr. Chambers told me about the transaction at the time it went through and when this cheque was taken out in 1930 I took the transaction up by myself and found that cheque had been signed under a power of attorney and I saw nothing to take exception to in it. Whoever the cheque was payable to, so far as I was concerned, I thought it was all right. The power of attorney was there and expressed as such the cheque would be signed in that way and I did nothing further with respect to it.
* * *
Q. Now when this money represented by this cheque which is exhibit "5" in this case, the $8,500 cheque, was credited to the account of J. W. McElroy and it was on the 29th of June?—A. Yes.
Q. Where did the money come from that went into Mr. McElroy'a account?—A. He borrowed it.
Q. No, no.
The Court: No.
Mr. Shaw: You must take his answer surely.
Q. The Court: No.
Q. The Court: Whose money was it that went into his account?—A. Mr. McElroy's. Q. Where did he get it?—A. He borrowed it from Mrs. Begley.
Mr. Shaw: My learned friend must take the answer he gets.
Mr. Nolan: I am saying this to you, Mr. Weaver, the money which went into Mr. McElroy's account that day came out of the account of Mrs. Mary Victoria Begley, that is right, is it not?—A. It may have come from the Bank of England but the fact is that so far as we are concerned it was his money. It was his money, he had borrowed it elsewhere.
The Court: That is not what you were asked, you know what you were asked, you are an intelligent man?—A. Yes, my Lord.
Q. You were asked where that money came from that paid off your bank?—A. Well, my Lord, it came from Mr. McElroy so far as we are concerned, if Mr. * * *
Q. The evidence before us now is that it came from a cheque drawn by Mr. McElroy on Mrs. Begley's account?—A. That is correct, my Lord.
Q. Is that so?—A. Yes.
The Court: Well why don't you say so frankly?
That is the manager's account of his attitude; but I find it difficult to ascribe to him or the assistant manager the degree of simplicity necessarily involved in the supposition that either of them believed McElroy's plan of obtaining a specific loan from the appellant had succeeded, or that the extraordinary method adopted by McElroy in getting possession of funds to pay the bank was not the result of something that required or called for explanation.
The legal result is plain. The relation of principal and agent does not necessarily involve the existence of a fiduciary bond between them, but it is beyond controversy that, superadded to the legal relation between the appellant and McElroy, there was another relation in virtue of which McElroy owed a fiduciary obligation to the appellant in respect of the funds entrusted to him (Burdick v. Garrick[2]; Gray v. Bateman[3]; Makepeace v. Rogers[4]; John v. Dodwell[5]; Reckitt v. Barnett[6].
In the circumstances of the present case, the burden of the fiduciary obligation to which McElroy was subject was transmitted to the bank. If McElroy had withdrawn the sum of $8,500 in cash, and paid it to the bank in discharge of his debt, the bank, in the absence of knowledge or suspicion that, in doing so, McElroy was violating a fiduciary obligation to the appellant, would have been protected. But the existence of the suspicion which, for the reasons I have given, must be imputed to the local officials of the bank, is a complete answer to any defence by the bank resting upon the hypothesis that they were bona fide transferees. The cheque in McElroy's hands was held by him under this fiduciary burden and the bank cannot in the circumstances retain the proceeds of it (John v. Dodwell)[7].
I am assuming for the moment that under the power of attorney, McElroy had authority to bind the appellant in his application of the moneys in her account in such a way that she could not question his notes as against persons dealing with him bona fide; and in particular that a payment of his debt, bona fide received by the bank, would not be open to such question. I shall discuss the power of attorney later. Whatever the scope of his powers under that instrument, those powers were conferred upon him for a specified purpose—the investment of the appellant's money. Any moneys in his hands drawn from her account would be subject to the trust for investment; and in the circumstances of this case, the slightest knowledge or suspicion on the part of the bankers that McElroy was not, in paying his debt to the bank, acting loyally in the performance of his fiduciary duty to his principal would be sufficient, in the absence of enquiry, to make the bank accountable to the principal. (Foxton v. Manchester[8]; Coleman v. Union Bank[9]; A. G. v. De Winton[10]; John v. Dodwell7); B. A. Elevator Co. v. Bank B.N.A.[11].
I turn now to the substantive defences. And first, as to estoppel. The estoppel set up is almost entirely grounded upon acquiescence. Acquiescence strictly imports a standing by in silence while, and with knowledge that a violation of one's right is in progress by somebody who is ignorant of the right. There is nothing of that sort here. The violation of the appellant's rights was a completed act before she became aware of it, and the sole question is whether she has lost her remedy. The remedy of one who has been deprived of his property by the fraud of another who had possession or control of it under a fiduciary obligation to him is, as a rule, twofold. He has a personal remedy, and he has a proprietary remedy; that is to say, he is entitled, under certain conditions, to follow, and require restitution of, his property. It is this latter remedy which the appellant prays, and, as I have said, her right to it, if it had been claimed without delay, is not denied.
Apart from one alleged conversation between the appellant and Chambers, the assistant manager of the bank, the basis of the bank's contention under this head is the fact that the appellant, after learning that McElroy had used the money drawn from her account to pay the bank, did not, for two years, inform the bank of McElroy's fraud.
Silence is effective as creating an estoppel only where there is a duty to speak. Was there any duty to speak arising out of what McElroy told the appellant in June, 1930? Her account of it is that McElroy, having informed her he had taken her money to pay the bank, she asked him why he had done so, and his answer was that
Weaver told him to take it, he said I would be back and I was a widow, and I would want to marry him and he told him to take my money and pay it back.
I shall have something to say about this evidence later. I. mention it here because the majority of the Court of Appeal attach some weight to it in this connection.
If the appellant believed McElroy, then the whole basis of the defence of estoppel by silence disappears, because, if Weaver had instigated McElroy's fraud, there could be no duty upon the appellant to give him information about what he already, ex hypothesi, knew too well.
Furthermore, it is quite plain that the bank did not act upon any supposed representation arising out of the appellant's conduct. Neither the manager nor assistant manager suggests that the bank was influenced by the appellant's silence.
I have already quoted passages from the evidence of Weaver in which he leaves us in no doubt as to the position of the bank. He had the power of attorney and the cheque, and since he considered the cheque was within the authority given, he concerned himself about nothing else. If the appellant had made a claim she would have been confronted with the power of attorney.
But the weakness of the bank's case, in so far as it rests upon estoppel by acquiescence, lies deeper. The remedy the appellant seeks to enforce is, as I have said, the pro- prietary remedy. In a proceeding in a court of equity, the appellant, having, as the Alberta courts have unanimously held, established her equitable title to the moneys, cannot be denied her remedy on the ground of acquiescence unless with a full knowledge of her rights and with independent advice, she has confirmed the impeachable transaction (De Busshe v. Alt[12]; Moxon v. Payne[13]).
It is quite plain, I think, from the whole of the evidence that she had no knowledge of her rights and she expressly says she did not know that the bank had done anything wrong. She knew, no doubt, that she had executed a power of attorney, and knowledge of the effect of that cannot be imputed to her in the absence of advice upon it. Moyer, to whom she took McElroy's promissory note in 1931 with the hope of getting some settlement from him, never suggested to her that she might have some remedy against the bank. Indeed, it seems probable that Moyer knew nothing about the transaction with the bank.
Chambers, the assistant manager of the bank, from whom she learned of McElroy's unauthorized withdrawals, explained the transaction to her as a loan to McElroy. Not a word was said to her by him about the purpose for which the money had been used. Down to the very eve of the present proceedings, she appears to have had no suspicion whatever that the bank was in any way accountable to her. Indeed, to me, it sems in the highest degree improbable that it would have occurred to a woman in her position, with her lack of experience in business, that the conduct of the bank could be affected by any inactivity on her part. She would, beyond question, assume, if she thought about it at all, that the bank had taken, and would take, all the necessary measures for its own protection. In' this respect, the case bears no sort of analogy to such cases as Ewing v. Dominion Bank[14] where a man of business experience is informed by a bank that his signature is attached to a commercial paper, takes no steps to disabuse his informant, who, he must know, will probably act on faith of the signature. Nor has it any sort of resemblance to Greenwood v. Martin's Bank[15] where the House of Lords had to consider a case in which the silence upon which the estoppel was founded was, to quote the words of Lord Tomlin (at p. 58),
deliberate and intended to produce the effect which it in fact produced, viz., the leaving of the respondents in ignorance of the true facts so that no action might be taken by them against the appellants's wife.
* * *
The course of conduct relied upon (Lord Tomlin says at p. 59) as founding the estoppel was adopted in order to leave the respondents in the condition of ignorance in which the appellant knew they were. It was the duty of the appellant to remove that condition however caused. It is the existence of this duty, coupled with the appellant's deliberate intention to maintain the respondents in their condition of ignorance, that gives its significance to the appellant's silence.
At p. 57, Lord Tomlin states the essential factors of an estoppel where it is alleged that a failure to disclose facts has deprived one of the parties of this opportunity to take proceedings against a third person. The first two of these factors are:
1. A representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made.
2. An act or commission resulting from the representation, whether actual or by conduct, by the person to which the representation is made.
It seems little less than fantastic to ascribe to the appellant an intention to induce by her silence the course of conduct which was followed by the bank; and equally so to suggest that from her point of view, her silence was calculated to induce that course, or any other course of conduct by the bank; and once again, equally so, to say that anything the bank did was the result of an interpretation of the appellant's conduct by them as amounting to a representation of any description whatever.
Then as to ratification. It is important here to recall that there was a fiduciary bond between McElroy and the appellant as well as the legal relation of principal and agent. It is also most important to observe that the transaction was, by McElroy and the bank, given a form in which it consisted of two separable and separate acts; first, a loan by the appellant to McElroy through McElroy, her attorney; and then a payment by McElroy personally to the bank in liquidation of his debt.
I have quoted the evidence of the bank manager in which he makes it clear that the bank's interpretation of the transaction was that the payment by McElroy to the bank was not an act done in his representative capacity, but a personal payment made on his own behalf out of his own moneys. The cheque was made payable to McElroy and, notwithstanding the fact that the sole purpose of drawing the cheque was to put McElroy in funds to pay the bank, the fair interpretation of what occurred is that both McElroy and the bank treated the transaction throughout as possessing the character I have indicated.
It is not entirely without relevancy to notice that in their communications with the appellant, the bank's officials admittedly presented the transaction to her as a loan to McElroy, making no reference to the application of the proceeds of the loan; implying clearly that the only phase of the transaction in which she was concerned was the first phase.
That could not, of course, in the least degree, militate against the right of the appellant to treat the moneys in McElroy's hands as funds held by him in trust for her, or against her right to enforce the trust against the bank, in the circumstances in which the fund was in fact transferred. Nevertheless, McElroy was not professing to act as her agent in paying the bank, and the bank was not receiving the money from anybody acting as the appellant's agent. This is a most important consideration because it follows that, as McElroy did not profess to represent the appellant in paying the bank, his act in doing so was not one which the appellant could validly make her own by ratification.
In this view, the issue of ratification is not of much importance because we are only concerned on this appeal, as I have already said, with the appellant's proprietary remedy against the bank. Nevertheless, it is desirable, I think, to call attention to the difficulty of holding that ratification has been established, even as between the appellant and McElroy. The acts relied upon as constituting ratification consist principally of three:
(1) Delay in taking proceedings to call McElroy to account after she became aware in June 1930, of McElroy's withdrawals;
(2) Steps taken by her through Moyer to procure some kind of settlement from McElroy; (3) An agreement in the autumn of 1931 to renew the note signed by McElroy on the 29th of June, and to accept security from McElroy in the form of an assignment of his rights under that agreement. Ratification must consist of words or conduct recognizing clearly the authorized act as the act of the ratifying principal. Now, I should have much difficulty in holding that the appellant really intended to recognize McElroy's withdrawal of her money from the bank as her act, or as an act rightfully done by him. Of course, a person may be bound, whatever his actual state of mind may be, by acts unequivocally evincing a recognition as his own of an unauthorized act; but I am far from satisfied, when the circumstances and the relations of the parties are all considered, that (apart from the point of knowledge of the nature of the transaction which I am about to discuss) what the appellant did falls within this category. When she was first informed of McElroy's withdrawals, it is quite evident that the information came to her as a blow. She was quite ill at the time and shortly afterwards underwent an operation for goitre. It was during her stay in the hosp

Court headnote

Begley v. Imperial Bank of Canada Collection Supreme Court Judgments Date 1934-12-21 Report [1935] SCR 89 Judges Duff, Lyman Poore; Cannon, Lawrence Arthur Dumoulin; Crocket, Oswald Smith; Hughes, Frank Joseph; Maclean On appeal from Alberta Subjects Agency Decision Content Supreme Court of Canada Begley v. Imperial Bank of Canada, [1935] S.C.R. 89 Date: 1934-12-21 Mary Victoria Begley (Plaintiff) Appellant; and Imperial. Bank of Canada (Defendant) Respondent 1934: October 11; 1934: December 21 Present:—Duff C.J. and Cannon, Crocket and Hughes, JJ. and Maclean J. ad hoc. ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ALBERTA Principal and agent—Banks and banking—Power of attorney—Exercise of for agent's own benefit—Agent paying his own debt to bank with cheque drawn on principal's account— Estoppel—Acquiescence—Ratification—Conduct of principal. The appellant, a widow, who had a savings account with the respondent bank, gave a power of attorney to one M. authorizing him "for me and in my name to draw and sign cheques on the said bank * * *" M. was indebted to the respondent bank and on being pressed for payment told the respondent's local manager that he "could borrow it from Mrs. Begley", the appellant. Shortly thereafter, after the appellant had left on a visit to Ontario, M. told the bank's accountant, who was aware of what had been said previously between M. and the manager, that he, M., wished to pay off his debt. Under M.'s instructions, the accountant made out a promissory note payable to the appellant on demand which M. signed for the amount of his debt to the bank. M. thereupon gave the bank a cheque on the appellant's account, signed by him as her attorney. The cheque was charged up against the appellant's account and M.'s indebtedness to the bank was cancelled, the note was left with the bank. The note was renewed twice by M. on July 31st, 1931, and in September, 1932. Alleging that she had not given M. authority to borrow or use her money for his own use, the appellant sued the bank respondent on December 29th, 1932. The trial judge maintained the action; but the Appellate Division reversed his judgment on the ground that the appellant's subsequent conduct in dealing with M. and her silence towards the bank constituted a complete estoppel. Held, in accord with the judgment of the Appellate Division ([1934] 1 W.W.R. 689) and the trial judge, that the respondent bank had no right as against the appellant to retain the monies so paid over to it by M.; but Held, reversing the judgment of the Appellate Division, Cannon J. dissenting, that, according to the facts and circumstances of this case, the appellant's conduct did not constitute estoppel or ratification. Per Cannon J. (dissenting):—Both on the ground of ratification and of estoppel, the respondent bank's defense is well founded, according to the facts of the case. APPEAL from the judgment of the Appellate Division of the Supreme Court of Alberta[1], reversing the judgment of the trial judge, Boyle J., and dismissing the appellant's action. The material facts of the case and the questions at issue are stated in the judgments now reported. H. G. Nolan for the appellant. E. K. Williams K.C. for the respondent. The judgment of Duff C.J. and Crocket and Hughes JJ. and of Maclean J. ad hoc was delivered by DUFF C.J.—This appeal involves a controversy concerning the rights of the appellant against the respondent bank in respect of certain moneys of the appellant paid to the bank by one McElroy, who at the time held a power of attorney from the appellant, in liquidation of his debt to the bank. The payment was made on the 29th of June, 1929. The appellant had been a depositor and had had a savings account with the bank since 1918. At the time of the transaction we have to consider, she was a widow, her husband having died in the previous December. She had been told by her husband, just before his last illness, that in matters of business, she should seek the assistance of McElroy. They both recognized that she would require assistance, because she was ill, suffering, as she afterwards learned, from an "inward goitre." Accordingly, in January, McElroy was appointed administrator of the husband's estate, and one Moyer, McElroy's solicitor, acted as solicitor in the business of administration. On the 21st of June, 1929, the appellant, McElroy and Moyer were in the bank, saw the manager and on that occasion, the sum of $13,000, which had been realized from the estate, was transferred from the administrator's account to the personal savings account of the appellant. McElroy was a customer of the bank and for some years his indebtedness to the bank had been heavy; it appears that from 1924 to 1929 his "direct liability" fluctuated from fourteen to eighteen thousand dollars, while he was under an "indirect liability" for something like fifteen thousand dollars, arising out of a mortgage held by the bank as collateral security. Weaver, the local manager of the bank of Calgary, who was called as a witness at the trial, states that, since early in 1925, he, as manager of the branch, had been trying to get McElroy to discharge his liability. In December 1928, his indirect liability was $14,800 and his direct liability $18,690. Some of the letters which passed between Weaver and the western head office at Winnipeg, and the head office at Toronto, are in evidence. On the 20th of December, 1927, the assistant general manager at Winnipeg, writing to Weaver, says that he is concerned about McElroy's account, and comments sharply upon a remark of McElroy's, reported by Weaver, about a "purchase of May wheat," as indicating that McElroy was gambling in wheat. This, Weaver was informed, was a very serious matter and he was directed "to get at the situation at once." On the 23rd of November, 1928, the assistant general manager at Toronto writes to the western superintendent at Winnipeg expressing his dissatisfaction with the information in his possession respecting McElroy's account, which showed a "direct" indebtedness at that time, apparently, of over $15,000. He complains that a suggestion that McElroy was going "to place a mortgage" in order to repay the bank was vague and appeared "to be drifting." Towards the end of December, McElroy succeeded in raising a loan of $13,000 odd, by mortgage upon his lands, reducing his direct liability to the bank to $5,289. On the 8th of January, the assistant general manager writes: You do not tell us how McElroy is going to pay the $5,289. Has he got sufficient money from the sale of grain and cattle to provide for it? Weaver replies on the 15th of January informing the assistant general manager that McElroy has not sufficient grain and cattle to pay the balance owing the bank, but that he has decided "to sell out" and is negotiating with one Herron for that purpose. McElroy's direct liability was increased to $7,296 by the 25th of March, 1929. On the following day a deposit was made reducing it to $3,423. On the 29th of June it had been increased to $8,518. By moneys transferred from the appellant's account to McElroy's account, it was paid in full on that day—the first time for at least five years when McElroy was free of debt to the bank. In the meantime, Weaver, stimulated by the head office, had been pressing McElroy for the payment of his indebtedness. Weaver states that at the end of April, 1929, McElroy told him that if the deal with Herron did not materialize, he could borrow the money from Mrs. Begley. Again, on the 7th of June, Weaver says, he asked McElroy "in regard to paying the loan," and McElroy, he avers, told him that Mrs. Begley "had not yet got back from the states," and that "he would make arrangements with her when she came back." The bank adduced this testimony by Chambers, the assistant manager: Q. Prior to the 29th of June had you any reason to anticipate the withdrawal of any of the funds from Mrs. Begley's savings account and the same to be applied in satisfaction of McElroy's indebtedness to the bank.—A. Yes. Q. Where did you get your information from?—A. From the correspondence between the branch manager and head office. Q. Have you any duty in connection with that correspondence.—A. I have to read every letter that goes out of the office the day that it goes out. Q. So you knew some time I take it before, or tell me whether you knew before the 29th of June that some transaction of the kind contemplated was going to take place—A. Yes, I knew it on, I believe the date is May 14th. Q. In May some time.—A. Yes. The appellant, who had gone in January to stay with her sister in Spokane, returned to Calgary on the 19th of June. On the 21st, with McElroy and Moyer, she visited the bank and had a short conversation with Weaver, and, apparently, on this occasion, $13,000, the sum realized from the husband's estate, was transferred to her personal account. She visited the bank again on the 24th of June, and still again on the 25th, when she arranged with the assistant manager Chambers for the transfer of some money in Hamilton, Ontario, where she was about to pay a visit, intending to leave Calgary, as she did, on the following day, the 26th. It was three days after her departure that McElroy, purporting to act under a power of attorney in the bank's printed form, transferred from the appellant's savings account to his own account, a sum equal to his debt to the bank for the purpose of paying that debt which was so applied. McElroy was not called as a witness, and the only direct evidence as to what occurred on the 29th of June, 1929, is that of the assistant manager, Chambers. In examination-in-chief he says: Q. Now will you narrate in your own language, Mr. Chambers, the exact transaction as you recall it.—A. On June 29th, which was Saturday, just at the closing of the bank, Mr. McElroy came in. Q. That would be at 12 o'clock I suppose?—A. Yes. Q. The bank closes on Saturdays at 12?—A. Yes. He came to me and said * * * Mr. Shaw: You have no objection to these conversations, just a moment please. Mr. Nolan: All right, Mr. Shaw. Q. Mr. Shaw: Well now, Mr. Chambers?—A. He said, "I wish to pay off my liability to the bank, will you please figure up how much it is I owe you." I then figured up his liability which amounted to $8,518.78. He then said I am going to borrow sufficient money from Mrs. Begley's account to pay this liability. Will you kindly make me out a note payable to Mrs. Begley. I said, "How long, when will the note be payable?" and he said, "On demand." Q. The Court: What is that?—A. The note would be payable on demand. I asked him at what rate of interest was to be added to the note and he said, Seven per cent." I made out this note and handed it to him and he signed it. He then said, "Will you please make me out a cheque" which I did, a cheque payable to J. W. McElroy for $8,500 which he signed "Victoria Begley per J. W. McElroy, Attorney." Q. Is the handwriting of the note and the cheque yours excepting the signature?—A. Yes. * * * Q. Then what happened?—A. He then said, "I will have to put this cheque to my credit." I said, "I will make out a deposit slip," and I made out this deposit slip for, put on the $8,500 and I said, "This will not be sufficient to clean up your liability in full and he gave a further cheque for $18.78 which I added to the $8,500 deposit, made out the deposit for his account Q. What did you do? All these documents were turned over to you, that is you had the cheque—A. I gave them all to Mr. McElroy to sign and when they were all made out and signed by him he handed them back to me. Q. Yes, what did you do with them?—A. I took the cheque and the note, the cheque and the deposit slip and gave them to the paying teller. I put them in the paying tellers slide. Q. That would be, your office is at the inner entrance to the bank? —A. Yes. Q. So you simply walked down behind the counter I suppose?—A. Behind the counter and put them into the paying teller's slide. The note I put in my basket. Before commenting upon this proceeding, it will be convenient to turn to the meeting which took place at Moyer's office between the appellant, McElroy and Moyer on the 24th of June. On that occasion the appellant executed the power of attorney, in the printed form furnished by the bank, upon which the bank relies in this litigation. The appellant remembers nothing about the power of attorney, and Moyer says it was not read over to her or explained to her. It was understood by all three, the appellant and Moyer agree, that the appellant's object in going to Moyer's office with McElroy, who accompanied her, was to make arrangements for the investment of the money in her savings account; which, as already mentioned, she had received from her husband's estate. She says that she then "appointed McElroy" as her agent to invest her money, and it was arranged, she says, and with this Moyer agrees, and there is no dispute about it, that McElroy was to try to get investments at a higher rate of interest than the ordinary bank rate on deposits; and that, in the meantime, her money was to be invested in government bonds. It was agreed that any other investments were to be subject to Moyer's approval. Moyer says this: Q. Did you read this document exhibit "4" over to Mrs. Begley?— A. No. Q. Did you explain it to her?—A. No. Q. Why didn't you?—A. Well, I cannot say, Mr. Nolan. She understood that the power of attorney was being given on the bank account and it was in keeping with the instructions she had given to vest authority in McElroy to operate the account for the purpose of investments she had sanctioned or agreed to. Q. All right then, are you saying to me that finally instructions were given that for the time being at least the investment was to be in Government bonds?—A. Yes. Q. Until such time as selected securities could be obtained, to which your approval must be given?—A. That is right, and subject to the retention of some reasonable amount in the account. Q. For current expenses?—A. That is right. The appellant declares most explicitly that at no time did she agree to lend money to McElroy. But the evidence goes further, and, as it is important, it will be better, perhaps, to quote a passage from it verbatim. The incident mentioned in the passage was on the occasion to which we have referred, on the 24th of June; when, as Moyer says, the final instructions were that "for the time being at least the investment was to be in government bonds." The appellant says: * * * Mr. McElroy asked me in an undertone voice if I would not let him have some money where he would pay me seven per cent interest, where if I put it out in Government Bonds, as I asked him, he said I would only get four or four and a half or something and I ignored it, I never let on I heard him say it at all. I said I wanted my money put out in Government bonds. Q. That was on Monday the 24th, was it, of June. Was it, Mrs. Begley.—A. Yes. Five days after this meeting, at which Moyer deposes, the appellant declared "she trusted" McElroy and himself "to do the right thing, and she was not going to worry about it at all "—five days after this interview at which these instructions were given, McElroy entering the Imperial Bank, declared to the assistant manager, according to the evidence of the latter, that he was going to pay off his debt to the bank; that, in order to do so, he was going to borrow from Mrs. Begley, and the assistant manager having drawn a cheque upon the appellant's account payable to McElroy's order, he forthwith attached the signature "Victoria Begley per J. W. McElroy, attorney." In addition to the sum thus withdrawn on the 29th of June, McElroy, within the succeeding four months and a half withdrew something like $3,000, professing to act under his power of attorney, of which $2,500 seems to have been applied for his own purposes, and without Moyer's knowledge; the remaining $500 was advanced to Moyer personally as a loan. The majority of the Appellate Division seem to have thought that the evidence left some doubt upon the point of the fraudulent character of McElroy's conduct. I regret to say I am unable to share, what I cannot help regarding, if I may say so with the greatest respect, as the somewhat indulgent view, which the learned judges consider to be admissible, of the effect of the evidence. It seems to have been thought that the appellant's attitude, in ignoring, to use her own expression, McElroy's request, might have been interpreted by McElroy as "silence" importing "consent." The evidence of Moyer and the appellant is quite unmistakable that the power of attorney was to be used for the purpose of investing the appellant's money in accordance with her instructions. McElroy could not possibly have misconstrued those instructions in the sense suggested. If he had done so, that is to say, if he had really believed that the appellant was acceding to his request, and agreeing to give him a loan, the matter would not have been allowed to rest there; he would have had the loan effected and the business closed before the appellant left Calgary on her visit to Ontario. McElroy was a man of experience in business, and could not have failed to realize that if he delayed the matter until after the appellant's departure, and then made use of his power of attorney in order to effect a loan to himself, without further communication of any sort with the appellant, he must expose himself to the gravest risk of misunderstanding and suspicion. No honest intelligent man of business experience would have behaved so. The judges of the Appellate Division, as well as the trial judge, have concurred in the view that the bank had no right, as against the appellant, to retain the moneys paid over by McElroy on the 29th of June. They all agree that if the appellant had, on becoming aware of what had occurred, demanded repayment, the bank could not have successfully resisted her demand. They agreed that the transaction in its character and in the circumstances attending it, was so far outside the ordinary course of business as to put the bank upon enquiry, and that the bank, having acted without the slightest investigation, not even so much as a question addressed to McElroy, could not, if such a demand had been made, have been permitted to keep the money. The majority of the Appellate Division hold that the appellant is now estopped by her conduct from asserting her claim, and think, with some hesitation, that she had ratified McElroy's act in withdrawing the money from her account as a loan to himself; and that this involved a ratification also of his act in employing the proceeds to pay his debt to the bank. With the greatest respect, I have been unable to satisfy myself that the bank has established these defences; but before considering them it is worth while, I think, to make one or two observations upon the transaction of the 29th of June. As the trial judge observes, none knew better than the officials of the bank the financial pressure to which McElroy was subject. Apparently, he had unsuccessfully essayed every expedient, save resort to the appellant, for the purpose of providing himself with funds in order to satisfy the just and urgent demand of the bank. On behalf of the bank, it is said, and the evidence already mentioned was offered in support of it, that they had been looking forward to payment by McElroy out of the proceeds of a loan which he expected to obtain from the appellant. He seems, as we have seen, to have informed the manager in April that he could borrow from the appellant. Then, as we have also seen, on the 7th of June, again, the manager tells us, he said that on the appellant's return "he would make arrangements with her." It must be assumed that the local officials of the bank had more than an ordinary interest in these expectations communicated to them by McElroy; information regarding them had, apparently, been communicated to the head office. McElroy's account, as administrator of the estate of the appellant's husband, seems to have been kept in the bank. Indeed, the evidence suggests that, during her absence in Spokane, the manager had been permitting the appellant to draw upon the moneys of the estate or upon the bank on the security of her interest in the estate. It may properly be inferred that before the appellant returned to Calgary on the 19th of June, the officials of the bank were fully cognisant of the amount of the funds which would pass into her possession from the estate. They must have realized that to give a loan of $8,500 to a man in McElroy's circumstances without security, out of a savings account deposit of $13,000, could be no light thing for a woman circumstanced as the appellant was. It is idle to suggest that their minds did not advert to such matters. The payment of McElroy's loan was a matter of no slight moment to them. It would require an unusual degree of credulity to accept the hypothesis that the probabilities of McElroy succeeding in obtaining such a loan, and as incidental thereto the financial situation of the appellant, were not of interest and concern to them. Such being the circumstances, it is impossible to suppose that they did not look forward to receiving some information from McElroy after the appellant's return, touching the result of his endeavours to obtain the assistance of the appellant in relieving him from his embarrasments. I cannot think it could have entered their minds antecedently that McElroy would endeavour to get rid of his difficulties by making use of a general authority under a power of attorney in the bank form without the specific consent of the appellant to a loan; but when McElroy proposed (after the appellant had returned to Calgary, and having remained there a week, going in and out of the bank, and had gone away for a lengthy visit in Ontario, and no communication had been received by the bank touching the success of his endeavours to arrange the loan he had been expecting to secure) that he should employ the power of attorney lodged by the appellant with the bank in order to effect an unsecured loan to himself of $8,500, out of the appellant's balance of $13,000, I am un- able to resist the conclusion that the suspicion of any sensible person in the situation of the bank officials, with all the knowledge they possessed, and interested as they were, must have been aroused. Neither the manager nor the assistant manager says he believed a loan had been obtained, or that he did not regard the circumstances as suspicious The manager, indeed, puts his point of view very clearly. In direct examination he says: Q. Mr. Weaver, you have suggested that the cheque, the $8,500 cheque, first came to your attention in January, 1929, and at the time of the bank inspection, you observed the form of it at that particular time, did you? —A. Yes, that it was 30. Q. Yes, 1930?—A. Yes. Q. Now what did you do following that?—A. When I found it was signed under power of attorney, I inspected the power of attorney which was on file in the office and had it filed away again, that is all I did. Q. You just investigated to find out whether or not there was a power of attorney?—A. Yes, and the power of attorney, so far as I knew, was in proper form. Q. Had you known anything about this transaction previously, I am talking now about the cheque, the $8,500 cheque and the note?—A. Will you please be a little more clear? Q. Here you see, Mr. Weaver, a cheque signed by, under power of attorney, now what did you do in connection with that, that put you on your inquiry did it?—A. I only inquired at the time if there was a power of attorney and if that power of attorney was in order and properly recorded and that is all I did, I did not consider there was anything further necessary. Q. No, the Court will not allow that conversation, but what I want to know is, did you have any other source of information other than Chambers with respect to this matter?—A. I may be very stupid in this question but I do not understand exactly what you wish to get from me. I can only explain that Mr. Chambers told me about the transaction at the time it went through and when this cheque was taken out in 1930 I took the transaction up by myself and found that cheque had been signed under a power of attorney and I saw nothing to take exception to in it. Whoever the cheque was payable to, so far as I was concerned, I thought it was all right. The power of attorney was there and expressed as such the cheque would be signed in that way and I did nothing further with respect to it. * * * Q. Now when this money represented by this cheque which is exhibit "5" in this case, the $8,500 cheque, was credited to the account of J. W. McElroy and it was on the 29th of June?—A. Yes. Q. Where did the money come from that went into Mr. McElroy'a account?—A. He borrowed it. Q. No, no. The Court: No. Mr. Shaw: You must take his answer surely. Q. The Court: No. Q. The Court: Whose money was it that went into his account?—A. Mr. McElroy's. Q. Where did he get it?—A. He borrowed it from Mrs. Begley. Mr. Shaw: My learned friend must take the answer he gets. Mr. Nolan: I am saying this to you, Mr. Weaver, the money which went into Mr. McElroy's account that day came out of the account of Mrs. Mary Victoria Begley, that is right, is it not?—A. It may have come from the Bank of England but the fact is that so far as we are concerned it was his money. It was his money, he had borrowed it elsewhere. The Court: That is not what you were asked, you know what you were asked, you are an intelligent man?—A. Yes, my Lord. Q. You were asked where that money came from that paid off your bank?—A. Well, my Lord, it came from Mr. McElroy so far as we are concerned, if Mr. * * * Q. The evidence before us now is that it came from a cheque drawn by Mr. McElroy on Mrs. Begley's account?—A. That is correct, my Lord. Q. Is that so?—A. Yes. The Court: Well why don't you say so frankly? That is the manager's account of his attitude; but I find it difficult to ascribe to him or the assistant manager the degree of simplicity necessarily involved in the supposition that either of them believed McElroy's plan of obtaining a specific loan from the appellant had succeeded, or that the extraordinary method adopted by McElroy in getting possession of funds to pay the bank was not the result of something that required or called for explanation. The legal result is plain. The relation of principal and agent does not necessarily involve the existence of a fiduciary bond between them, but it is beyond controversy that, superadded to the legal relation between the appellant and McElroy, there was another relation in virtue of which McElroy owed a fiduciary obligation to the appellant in respect of the funds entrusted to him (Burdick v. Garrick[2]; Gray v. Bateman[3]; Makepeace v. Rogers[4]; John v. Dodwell[5]; Reckitt v. Barnett[6]. In the circumstances of the present case, the burden of the fiduciary obligation to which McElroy was subject was transmitted to the bank. If McElroy had withdrawn the sum of $8,500 in cash, and paid it to the bank in discharge of his debt, the bank, in the absence of knowledge or suspicion that, in doing so, McElroy was violating a fiduciary obligation to the appellant, would have been protected. But the existence of the suspicion which, for the reasons I have given, must be imputed to the local officials of the bank, is a complete answer to any defence by the bank resting upon the hypothesis that they were bona fide transferees. The cheque in McElroy's hands was held by him under this fiduciary burden and the bank cannot in the circumstances retain the proceeds of it (John v. Dodwell)[7]. I am assuming for the moment that under the power of attorney, McElroy had authority to bind the appellant in his application of the moneys in her account in such a way that she could not question his notes as against persons dealing with him bona fide; and in particular that a payment of his debt, bona fide received by the bank, would not be open to such question. I shall discuss the power of attorney later. Whatever the scope of his powers under that instrument, those powers were conferred upon him for a specified purpose—the investment of the appellant's money. Any moneys in his hands drawn from her account would be subject to the trust for investment; and in the circumstances of this case, the slightest knowledge or suspicion on the part of the bankers that McElroy was not, in paying his debt to the bank, acting loyally in the performance of his fiduciary duty to his principal would be sufficient, in the absence of enquiry, to make the bank accountable to the principal. (Foxton v. Manchester[8]; Coleman v. Union Bank[9]; A. G. v. De Winton[10]; John v. Dodwell7); B. A. Elevator Co. v. Bank B.N.A.[11]. I turn now to the substantive defences. And first, as to estoppel. The estoppel set up is almost entirely grounded upon acquiescence. Acquiescence strictly imports a standing by in silence while, and with knowledge that a violation of one's right is in progress by somebody who is ignorant of the right. There is nothing of that sort here. The violation of the appellant's rights was a completed act before she became aware of it, and the sole question is whether she has lost her remedy. The remedy of one who has been deprived of his property by the fraud of another who had possession or control of it under a fiduciary obligation to him is, as a rule, twofold. He has a personal remedy, and he has a proprietary remedy; that is to say, he is entitled, under certain conditions, to follow, and require restitution of, his property. It is this latter remedy which the appellant prays, and, as I have said, her right to it, if it had been claimed without delay, is not denied. Apart from one alleged conversation between the appellant and Chambers, the assistant manager of the bank, the basis of the bank's contention under this head is the fact that the appellant, after learning that McElroy had used the money drawn from her account to pay the bank, did not, for two years, inform the bank of McElroy's fraud. Silence is effective as creating an estoppel only where there is a duty to speak. Was there any duty to speak arising out of what McElroy told the appellant in June, 1930? Her account of it is that McElroy, having informed her he had taken her money to pay the bank, she asked him why he had done so, and his answer was that Weaver told him to take it, he said I would be back and I was a widow, and I would want to marry him and he told him to take my money and pay it back. I shall have something to say about this evidence later. I. mention it here because the majority of the Court of Appeal attach some weight to it in this connection. If the appellant believed McElroy, then the whole basis of the defence of estoppel by silence disappears, because, if Weaver had instigated McElroy's fraud, there could be no duty upon the appellant to give him information about what he already, ex hypothesi, knew too well. Furthermore, it is quite plain that the bank did not act upon any supposed representation arising out of the appellant's conduct. Neither the manager nor assistant manager suggests that the bank was influenced by the appellant's silence. I have already quoted passages from the evidence of Weaver in which he leaves us in no doubt as to the position of the bank. He had the power of attorney and the cheque, and since he considered the cheque was within the authority given, he concerned himself about nothing else. If the appellant had made a claim she would have been confronted with the power of attorney. But the weakness of the bank's case, in so far as it rests upon estoppel by acquiescence, lies deeper. The remedy the appellant seeks to enforce is, as I have said, the pro- prietary remedy. In a proceeding in a court of equity, the appellant, having, as the Alberta courts have unanimously held, established her equitable title to the moneys, cannot be denied her remedy on the ground of acquiescence unless with a full knowledge of her rights and with independent advice, she has confirmed the impeachable transaction (De Busshe v. Alt[12]; Moxon v. Payne[13]). It is quite plain, I think, from the whole of the evidence that she had no knowledge of her rights and she expressly says she did not know that the bank had done anything wrong. She knew, no doubt, that she had executed a power of attorney, and knowledge of the effect of that cannot be imputed to her in the absence of advice upon it. Moyer, to whom she took McElroy's promissory note in 1931 with the hope of getting some settlement from him, never suggested to her that she might have some remedy against the bank. Indeed, it seems probable that Moyer knew nothing about the transaction with the bank. Chambers, the assistant manager of the bank, from whom she learned of McElroy's unauthorized withdrawals, explained the transaction to her as a loan to McElroy. Not a word was said to her by him about the purpose for which the money had been used. Down to the very eve of the present proceedings, she appears to have had no suspicion whatever that the bank was in any way accountable to her. Indeed, to me, it sems in the highest degree improbable that it would have occurred to a woman in her position, with her lack of experience in business, that the conduct of the bank could be affected by any inactivity on her part. She would, beyond question, assume, if she thought about it at all, that the bank had taken, and would take, all the necessary measures for its own protection. In' this respect, the case bears no sort of analogy to such cases as Ewing v. Dominion Bank[14] where a man of business experience is informed by a bank that his signature is attached to a commercial paper, takes no steps to disabuse his informant, who, he must know, will probably act on faith of the signature. Nor has it any sort of resemblance to Greenwood v. Martin's Bank[15] where the House of Lords had to consider a case in which the silence upon which the estoppel was founded was, to quote the words of Lord Tomlin (at p. 58), deliberate and intended to produce the effect which it in fact produced, viz., the leaving of the respondents in ignorance of the true facts so that no action might be taken by them against the appellants's wife. * * * The course of conduct relied upon (Lord Tomlin says at p. 59) as founding the estoppel was adopted in order to leave the respondents in the condition of ignorance in which the appellant knew they were. It was the duty of the appellant to remove that condition however caused. It is the existence of this duty, coupled with the appellant's deliberate intention to maintain the respondents in their condition of ignorance, that gives its significance to the appellant's silence. At p. 57, Lord Tomlin states the essential factors of an estoppel where it is alleged that a failure to disclose facts has deprived one of the parties of this opportunity to take proceedings against a third person. The first two of these factors are: 1. A representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made. 2. An act or commission resulting from the representation, whether actual or by conduct, by the person to which the representation is made. It seems little less than fantastic to ascribe to the appellant an intention to induce by her silence the course of conduct which was followed by the bank; and equally so to suggest that from her point of view, her silence was calculated to induce that course, or any other course of conduct by the bank; and once again, equally so, to say that anything the bank did was the result of an interpretation of the appellant's conduct by them as amounting to a representation of any description whatever. Then as to ratification. It is important here to recall that there was a fiduciary bond between McElroy and the appellant as well as the legal relation of principal and agent. It is also most important to observe that the transaction was, by McElroy and the bank, given a form in which it consisted of two separable and separate acts; first, a loan by the appellant to McElroy through McElroy, her attorney; and then a payment by McElroy personally to the bank in liquidation of his debt. I have quoted the evidence of the bank manager in which he makes it clear that the bank's interpretation of the transaction was that the payment by McElroy to the bank was not an act done in his representative capacity, but a personal payment made on his own behalf out of his own moneys. The cheque was made payable to McElroy and, notwithstanding the fact that the sole purpose of drawing the cheque was to put McElroy in funds to pay the bank, the fair interpretation of what occurred is that both McElroy and the bank treated the transaction throughout as possessing the character I have indicated. It is not entirely without relevancy to notice that in their communications with the appellant, the bank's officials admittedly presented the transaction to her as a loan to McElroy, making no reference to the application of the proceeds of the loan; implying clearly that the only phase of the transaction in which she was concerned was the first phase. That could not, of course, in the least degree, militate against the right of the appellant to treat the moneys in McElroy's hands as funds held by him in trust for her, or against her right to enforce the trust against the bank, in the circumstances in which the fund was in fact transferred. Nevertheless, McElroy was not professing to act as her agent in paying the bank, and the bank was not receiving the money from anybody acting as the appellant's agent. This is a most important consideration because it follows that, as McElroy did not profess to represent the appellant in paying the bank, his act in doing so was not one which the appellant could validly make her own by ratification. In this view, the issue of ratification is not of much importance because we are only concerned on this appeal, as I have already said, with the appellant's proprietary remedy against the bank. Nevertheless, it is desirable, I think, to call attention to the difficulty of holding that ratification has been established, even as between the appellant and McElroy. The acts relied upon as constituting ratification consist principally of three: (1) Delay in taking proceedings to call McElroy to account after she became aware in June 1930, of McElroy's withdrawals; (2) Steps taken by her through Moyer to procure some kind of settlement from McElroy; (3) An agreement in the autumn of 1931 to renew the note signed by McElroy on the 29th of June, and to accept security from McElroy in the form of an assignment of his rights under that agreement. Ratification must consist of words or conduct recognizing clearly the authorized act as the act of the ratifying principal. Now, I should have much difficulty in holding that the appellant really intended to recognize McElroy's withdrawal of her money from the bank as her act, or as an act rightfully done by him. Of course, a person may be bound, whatever his actual state of mind may be, by acts unequivocally evincing a recognition as his own of an unauthorized act; but I am far from satisfied, when the circumstances and the relations of the parties are all considered, that (apart from the point of knowledge of the nature of the transaction which I am about to discuss) what the appellant did falls within this category. When she was first informed of McElroy's withdrawals, it is quite evident that the information came to her as a blow. She was quite ill at the time and shortly afterwards underwent an operation for goitre. It was during her stay in the hosp

Begley v. Imperial Bank of Canada

Court headnote

Full judgment (source text)

Administration des aéroports régionaux d’Edmonton c. Thibodeau

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Full judgment (source text)

Administration des aéroports régionaux d’Edmonton c. Thibodeau

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