Supreme Court
Action No. 375 of 1980
15th July, 1980
Moe, CJ

Mr.. Denys Barrow for the Plaintiff
Mr.. John Avilez for the Defendant

Agency - Plaintiff's director obtaining payment by cash in his own name from defendant for work done by Plaintiff - whether director had ostensible authority - Relevant principles governing exercise of ostensible authority - whether Plaintiff liable for tort of conversion because of actions of its director (agent) in accepting payment in his own name without authority.

J U D G M E N T

1. The main question for determination in this case is whether on the
   30th October, 1979 the defendant company paid the plaintiff company the sum of $23,255.91.

2. The parties are agreed that the plaintiff company performed some construction work for the defendant company. Mr. Luke Espat, at all material times, a director of the plaintiff company was in charge of the job and his duties included collecting bills in relation thereto. Mr. Espat, on three occasions, presented to the defendant company, bills for payment in respect of work done by the plaintiff company. The bills or requests for payment were signed by Mr. Espat. On the first two occasions, Mr. Espat received from the defendant cheques drawn in favour of H.L.C. Engineers Ltd for the sums then requested. On the third occasion, being the 30th October 1979, Mr. Espat received from the defendant a cheque drawn in favour of Luke Espat for the sum of $23,255.91, the amount then requested.

Here a specific portion of Mr. Luke Espat's evidence may be added to the above agreed position.

Mr.. Espat said "I got the amount of $23,255.91. I got the money in my name. I received the money on behalf of H.L.C. Engineers Ltd., I didn't pay over the money because I and H.L.C. had internal problems. H.L.C. owed me money --- I held the money against a day of reckoning." "I requested payment in my name specifically of Mr. Fuller (Manager of Shell Belize Ltd). At the particular time I couldn't draw on the Company's Account. If the cheque have been written in the company's name, I could not have cashed it."

The defendant maintains that the payment to Mr. Espat on the 30th October, 1979 was validly made to the agent of the plaintiff company. That the defendant thereby paid the plaintiff in satisfaction of the demand made in its name by its agent acting with actual or ostensible authority to receive money on behalf of the plaintiff. The plaintiff on the other hand contends (i) that Mr. Espat as an individual director had no authority and was never held out by the plaintiff as having authority to bind the plaintiff; (ii) if it is held that Mr. Espat had ostensible authority to bind the plaintiff the transaction was so unusual that the defendant was bound to enquire into the property of the transaction.

I am guided first of all by the decision in Bradford & Sons v. Price Brothers 129 L.T. 408 where it was held that a cheque in this form is equivalent to cash. When therefore the cheque drawn in favour of Mr. Espat was honored, Mr. Espat received a cash payment. See Clay Hill Brick & Tile Co v. Rawlings (1938) 4 A.E.R.200.

The first question which arises therefore is whether Mr. Espat had actual authority to receive money due to the plaintiff from the defendant by way of a cash payment. There is no evidence whatever that any actual authority had been conferred on Mr. Espat to receive payments for the plaintiff in this manner. All the evidence negatives such a conclusion.

The question then remains whether Mr. Espat was acting within the scope of his apparent authority in such circumstances that the plaintiff would be precluded from setting up lack of actual authority. Did Mr. Espat have ostensible authority to receive money due to the plaintiff from the defendant by way of a cheque drawn in favor of Mr. Espat?

In Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd, (1964) 2 Q.B. 480 Diplock L.J. in an analysis of the law as to the ostensible authority of officers and servants to enter into contracts on behalf of corporations set out 4 conditions which must be fulfilled to entitle a third party to enforce against a company a contract entered into on behalf of the company by an agent who had no actual authority to do so. He said "It must be shown:-

(i) that a representation that the agent had authority to enter on behalf of the company into contract of the kind sought to be enforced was made to the third party;

(ii) that such representation was made by a person or persons who had actual authority to manage the business of the company either generally or in respect of those matters to which the contract relates;

(iii) that the third party was induced by such representation to enter into the contract, i.e., that he in fact relied upon it; and

(iv) that under its memorandum or articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent."

I turn to see whether those conditions were satisfied in this case. On the basis of the undisputed evidence outlined above I held that the plaintiff company by its conduct had clearly represented to the defendant company that Mr. Espat had authority to receive on the plaintiff's behalf

However, it was submitted for the plaintiff that the transaction in question was so unusual that the defendant ought to have enquired whether Mr. Espat was authorized to take payment for the plaintiff in his own name. Reliance was placed on Underwood (A.L) v. Bank of Liverpool (1924) 1 K.B. 775. In that case where a sole director and principal shareholder of a company paid into his own account cheques drawn in favour of the company, the bank was held precluded from setting up that the director was acting within the scope of his apparent authority as agent of the company on two grounds one of which was that the act of an agent paying his principal's cheques into his own account was so unusual as to put the bank on inquiry.

In Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd (supra) a number of cases involving most unusual transactions was reviewed. It was pointed out that the transactions concerned were such as would not be within what would ordinarily be expected to be the scope of the authority of the officer purporting to act on behalf of the company. There was therefore no ground for saying that the officer in question was in fact being held out by the company as having authority to perform the act relied on. See Wilmer L.J. at page 494 and Diplock L.J. at pages 507 and 508.

In this case the unusual nature of the transaction in question is clear. The words of Tucker J in Clay Hill case (supra) are most apt. "It is of course unusual for anyone acting on behalf of a company to receive a cheque made out to himself personally. The normal, usual and proper way of receiving payment is by means of a cheque made out in favour of the company." It is all the more so, when the payment is for a tidy sum of $23,000.00. That the transaction in this instance was unusual is demonstrated by the evidence that Anselmo Waight, Chief Accountant at the defendant company, drew it to the attention of the manager of the defendant company that the cheque was drawn in favour of Luke Espat and not in favour of the plaintiff. Mr Fuller the company manager said "Luke Espat asked whether I could make the cheque payable to him personally and without stopping to think, I agreed. ---- Under normal circumstances I would not have issued the cheque to him. But I was taken up with other things at the time. I would say he took advantage of my being preoccupied."

I held that the act of Mr. Espat in receiving payment for the plaintiff by way of a cheque drawn in his favour was so unusual that the defendant was put on inquiry to ascertain whether Mr. Espat in fact had any authority to so receive the money. Consequently the representation that Mr. Espat had authority to receive on the plaintiff's behalf money due to it was not a representation that Mr. Espat had authority to receive for the plaintiff $23,255.91 by way of a cash payment. Condition (1) above is not fulfilled. In the circumstances the defendant cannot be held to have paid the plaintiff the sum of $23,255.91 on the day in question.

The defendant counterclaimed for damages for conversion by the plaintiff's director, servant, agent. The defendant submitted that if it is held that the defendant has not discharged its indebtedness to the plaintiff, then the plaintiff must be held responsible for the tort of conversion by its agent Luke Espat. The Law on this is adequately set out in Halsbury's Laws (3rd edition) Vol. 1 paragraph 478 as follows: "Where an act done by an agent is not done in the ordinary course of business or falls outside the apparent scope of his authority, the principal is not bound by such act even if the opportunity to do it arose out of the agency and it was purported to be done on his behalf unless he expressly authorised it or adopted it ---." Thus without giving a decision in this case as to whether or not Mr. Espat was guilty of conversion, I must hold by virtue of my finding above that the plaintiff is not bound by the particular act of Mr. Espat on the day in question. The defendant's counterclaim fails.

Judgment accordingly entered for the plaintiff in the sum of $23,255.91 and the plaintiff to have its costs.