Wakilii

Hasmani v National Bank of India Limited (Civ. App. No. 18 of 1938)

East African Court of Appeal · [1938] EACA 99 · 1938 Appeal Dismissed; Cross-Objection Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from decision of Acting Judge (Tanganyika) by original defendant against findings on balance of account and money had and received, with cross-objection by original plaintiffs on dismissal of claim on bill of exchange
Decision
Judgment for respondents on all three grounds: liability on the bill of exchange, balance of account, and money had and received

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Court held that a principal is liable on a bill of exchange drawn per pro by his agent where the agent acted within the class of authorized business, notwithstanding that the particular transaction involved fraud and forged documents. The agent's authority to draw bills in satisfaction of debts and to operate on the principal's account included the drawing and discounting of this bill. The appellant was liable on the bill itself, on the resulting overdraft, and for money had and received to the use of the bank.

Outcome

Judgment for respondents on all three grounds: liability on the bill of exchange, balance of account, and money had and received

Facts

The appellant, a large exporter, constituted his son Esmail as his attorney with power to draw, accept and endorse bills of exchange in satisfaction of debts but with no power to sign accommodation bills. The son was also authorized to operate and overdraw on the appellant's account with the respondent bank. From September 1935 the attorney systematically obtained money from the bank by discounting bills drawn per pro the appellant against forged bills of lading for non-existent goods. The proceeds of each bill were credited to the appellant's account and used to meet the previous bill. On 2 February 1937 the attorney discounted a bill for £50,000 to meet a previous bill for £57,000. Days after the proceeds were credited and transmitted to London, the bank discovered the fraud. The bank debited the appellant's account with £50,000, resulting in a large debit balance. The bank sued on the bill, on the balance of account, and for money had and received.

Issues

  1. Whether the appellant was liable on a bill of exchange drawn per pro by his agent using forged shipping documents in respect of non-existent goods.
  2. Whether the agent acted within the actual limits of his authority when drawing and discounting the fraudulent bill of exchange.
  3. Whether the respondent bank was entitled to judgment on the balance of account following dishonour of the bill.
  4. Whether the proceeds of the bill were money had and received by the appellant to the use of the respondents.

Orders

  • Appeal dismissed with costs.
  • Cross-objection allowed with costs (if any have been incurred).
  • Certified for two counsel.

Rules and key headnotes

Agency — Bills of Exchange — Authority of Agent — Fraud Within Scope of Authority
A principal is liable on a bill of exchange drawn per pro by his agent where the agent acted within the class of business he was authorized to transact, notwithstanding that the particular transaction was fraudulent and involved forged documents unknown to the third party.
Agency — Scope of Authority — Authorized Class of Acts
Although the particular act which gives the cause of action may not be authorized, if the act is done in the course of employment which is authorized then the principal is liable for the act of the agent.
Principal and Agent — Fraud of Agent — Application of Indian Contract Act s.238
Misrepresentations made or frauds committed by agents acting in the course of their business for their principals have the same effect on agreements as if such frauds had been made or committed by the principals, but frauds committed in matters which do not fall within the agent's authority do not affect their principals.
Bills of Exchange — Signature by Procuration — Bills of Exchange Ordinance s.25
A signature by procuration operates as notice that the agent has but a limited authority to sign, and the principal is only bound by such signature if the agent in so signing was acting within the actual limits of his authority. Section 25 is declaratory of the common law but does not extend beyond it or alter it.
Agency — Benefit to Principal — Liability Not Dependent on Principal's Benefit
If the act belongs to an authorized class, it is not material whether the agent intends the principal's benefit or not, nor whether the principal in fact derives any benefit. A principal is liable for the fraud of his agent within the scope of his authority whether the fraud is committed for the benefit of the principal or for the benefit of the agent.
Banking — Overdraft — Mandate to Operate and Overdraw
Where an agent holds a mandate authorizing him to operate and overdraw on the principal's account, and the agent's drawing of bills and crediting of proceeds falls within his authority, the principal is liable for the resulting overdraft when the bills are dishonoured.
Restitution — Money Had and Received — Wrongful Act of Agent
Where by any wrongful or unauthorized act of an agent the money of a third person comes to the hands of the principal or is applied for his benefit, the principal is liable jointly and severally with the agent to restore the amount. If the proceeds come into the principal's hands he is liable whether he in fact benefited or not, and liability is not dependent on proving actual knowledge if the principal had the means of knowledge.

Legislation cited (4)

  • Bills of Exchange Ordinance 1931 (Tanganyika) s.25
  • Bills of Exchange Ordinance 1931 (Tanganyika) s.51(4)
  • Bills of Exchange Ordinance 1931 (Tanganyika) s.51(7)
  • Indian Contract Act 1872 s.238

Cases cited (12)

  • Citizens Life Assurance Co. v Brown (1904 AC 423)
  • Lloyd v Grace Smith and Co. (1912 AC 716)
  • Barwick v English Joint Stock Bank (1867) 2 Ex 259
  • Houldsworth v City of Glasgow Bank (5 AC 326)
  • Morison v London County and Westminster Bank Ltd (1914) 3 KB 356
  • Mackay v Commercial Bank of New Brunswick (1874) 5 PC 394
  • Swire v Francis (3 AC 106)
  • Marsh v Keatinge (131 ER 1094)
  • Reid v Rigby (1894) 2 QB 40
  • Jacobs v Morris (1902) 1 Ch 816
  • Woods v Thiedemann (158 ER 973)
  • Banque du Congo Beige v H D Hasmani and Juma Khaki (Civil Appeals Nos. 17 and 19 of 1937)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Hasmani v National Bank of India Limited (Civ. App. No. 18 of 1938) [1938] EACA 99 (1 January 1938)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.