Scottish Court of Session Decisions

On 24th July 1911 Thomas Coubrough and others, the executors of the deceased Miss Elizabeth Muir, Greenlaw Avenue, Paisley,

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pursuers, brought an action against Alexander Craig, joiner, Paisley, and another, testamentary trustees of the late William Craig, wine and spirit merchant, Paisley, defenders, for (1) reduction of a pretended bond and disposition in security for £500 bearing to be granted by her in favour of the said William Craig over certain property in Paisley belonging to her, and (2) for delivery of the title-deeds then in possession of Mr Craig's agents.

The defenders pleaded, inter alia—“(2) The said bond and disposition in security being the deed of the granter, the defenders are entitled to absolvitor. (3) In any event the defenders should be assoilzied in respect (1st) that the deceased Elizabeth Muir and her representatives are barred by her actings from challenging the bond in question; (2nd) that the said deceased acquiesced in and homologated said bond; and (3rd) of mora and taciturnity.”

The facts are given in the opinion (infra) of the Lord Ordinary ( Dewar), who on 1st August 1912, after proof, granted decree as craved.

Opinion—This action was raised on 24th July 1911 at the instance of the late Miss Muir, 11 Greenlaw Avenue, Paisley, who died on 30th September 1911, and the trustees accepting and acting under her will have sisted themselves as pursuers in the action. The question for decision is whether a bond and disposition in security—the signature to which is alleged to have been forged—now falls to be reduced, and the title-deeds delivered to the pursuers.

Miss Muir was an old lady who owned some house property in Campbell Street, Paisley, valued at £750, and this was practically all her capital. In or about the year 1902 she transferred the title-deeds of this property to her nephew, the late William Bowie, who at that time was a solicitor of good repute in Paisley, but when he died on 2nd September 1910 his affairs were found to be hopelessly involved, and it was discovered that for a number of years prior to his death he had persistently misappropriated large sums of money belonging to his clients. Among other defalcations the pursuers allege that he forged Miss Muir's signature to the bond and disposition in security now under reduction. It is dated 11th and recorded 12th August 1904, and bears to have been granted by Miss Muir in favour of William Craig in consideration of the sum of £500 alleged to have been paid to her by William Craig's curator bonis. It is averred on record that Miss Muir did not sign this deed, or authorise or employ William Bowie to grant it, that she did not receive the £500 or any part thereof, that her signature and the signature of the instrumentary witness James Charters were forged, and that on learning of the existence of the bond Miss Muir at once repudiated it. The defenders deny that Miss Muir's signature was forged, and alternatively they plead that even assuming it was, Miss Muir and her representatives are barred by her actions from challenging it, and that in any event as the defenders obtained the title-deeds from the late William Bowie —while acting within the scope of his employment—as additional security, they are not bound to return them until the money advanced has been paid.

I am of opinion that this defence has failed in all its branches.

I have no doubt that Miss Muir's signature was forged. Miss Muir took much interest in her affairs, and largely managed them herself. She often referred to the fact—and was very proud of it—that there was no burden on her property, and she was naturally much surprised when she came to know that a bond and disposition in security had been granted over it. She stated that she had given no authority, and when she saw the deed she immediately repudiated the signature both verbally and in writing, and gave her solicitor instructions to raise this action.… [After examining the evidence and holding the forgery proved his Lordship proceeded—]

But it is said that Miss Muir by her actings adopted the deed, and that the pursuers are barred by her negligence from now challenging it. The alleged negligence is as follows:—In June 1910 Miss Muir received an official notice from the Inland Revenue claiming £1, Is. lOd. of tax in respect of ‘interest.’ No mention was made of any bond, and Miss Muir did not know what the notice referred to, but thought probably it was some of ‘Mr Lloyd George's new taxes.’ She consulted her nephew Thomas Bowie, and as he did not know what it meant she asked him to call at the Inland Revenue Office. He did so, and discovered that there was a bond over the property. As he had often heard his aunt say that there was no burden on her property, he had an interview with his brother William and asked him to explain. William confessed that he had obtained the money from the defenders on the security of Miss Muir's property without her knowledge or consent. He did not say that he had forged her signature, and Thomas states that he thought that the money had been obtained without any bond and on the security of the titles alone. I have some difficulty in understanding how he could think so when he admits that he had been satisfied at the Inland Revenue Office that there actually was a bond. But whether he knew the whole truth or not, he agreed at William's earnest request not to disclose the facts to Miss Muir, and accordingly when, a few days later, she asked him what the assessor had said he replied that he had not seen him. This was in June, and nothing further was said or done until after William's death, which occurred on 2nd September, when, as I have said, his affairs were found to be much involved and his estate bankrupt. On the 19th September Thomas Bowie told his sister Miss M. Bowie of William's confession, and asked her to inform Miss Muir and she did so, and Miss Muir then learned for the first time what the Inland Revenue really meant. In these circumstances the defenders argued that

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although the notice did not make any reference to a bond on Miss Muir's property, yet it was sufficient, if she had been reasonably diligent, to enable her to discover that the bond in point of fact existed and that her signature had been forged; and they maintained that the knowledge which she might by the exercise of reasonable diligence have acquired must be imputed to her, and that, having allowed the matter to lie over until after William's death when the circumstances were altered for the worse, she must be held to have adopted the deed, and that her representatives were accordingly barred from pleading forgery. In support of this argument

I was referred to a number of English cases, but so far as I can see they have no application to the facts of this case.I quite understand that if a man knows that another is relying upon his forged signature he may incur liability unless he divulges the fact before the position alters for the worse, and wilful ignorance may amount to actual knowledge. Thus, for example, a person must not deliberately abstain from inquiry where inquiry ought to be made; and if the defenders had proved that Miss Muir knew—or even in the absence of actual knowledge—that she had good reason to believe that William Bowie had forged her signature, and that she had deliberately refrained from making inquiry in order to screen him —the case would have been different. But they have not proved anything of that kind, and as I understand their argument that is not the case they present. Their case is that the Inland Revenue notice was sufficient to put her on her inquiry, that she ought to have inquired, and if she had the forgery would have been disclosed. Briefly put the argument, I think, comes to this—the notice ought to have awakened Miss Muir's suspicion, and she must be held liable because it did not. But there is no legal obligation on a person to be suspicious, and even if there were I see nothing in the notice to excite suspicion—of forgery. I think it was much more natural for an old lady to suspect that it conveyed an intimation of a new tax, and I do not think that she displayed any negligence in taking that view. I have no doubt that a great many people pay their taxes without any inquiry at all, and I do not think that it would be reasonable to hold that in doing so they are guilty of such negligence in the management pf their own affairs as may render them liable to their neighbours; and further, Miss Muir stood in no special relation to the defenders, and I am quite unable to see on what legal principle it can be maintained that she was bound to make special inquiry into her affairs in their interests. It is not said that the forgery was caused by her negligence, but only that she negligently failed to discover it. She did nothing to deceive or mislead the defenders or to prevent them discovering it for themselves. She did not know of the existence of the bond until after William Bowie's death, and all she then knew was that her signature was forged.

In these circumstances I do not think that it can in any reasonable sense be said that she adopted the deed. Her knowledge is the only possible basis for adoption, and it is proved that she had no knowledge at all.

Finally, the defenders argued that they were not in any event bound to deliver the title-deeds, because they had stipulated that the titles should be handed over to them as additional security, and in handing them over William Bowie was acting within the scope of his authority. But I do not think he was. He had no more authority to pledge the titles than he had to forge Miss Muir's signature, and the title-deeds without the bond afforded no security at all. I think the forgery and the handing over of the titles was one dishonest transaction to which Miss Muir was in no way a party and which she was powerless to prevent. The source of all the trouble was, I think, simply this—the defenders permitted themselves to be duped by William Bowie. They trusted him and handed over their money to him, and discovered when too late that they had made a mistake. Instead of seeing Miss Muir sign the deed or asking her to acknowledge the signature, they accepted Bowie's assurance that it was hers. This, as events have proved, was a fatal error, but it was an error which they themselves made, and they cannot in my opinion hold Miss Muir's estate liable for it.

“I am accordingly of opinion on the whole matter that the pursuers are entitled to decree in terms of the conclusions of the summons, with expenses.”

The defenders reclaimed, and argued—Esto that Miss Muir's signature had been forged, she was barred from repudiating it, for the knowledge of her agent was her knowledge. Where, as here, that agent was employed for the express purpose of ascertaining whether the bond existed or not, he was “an agent to know,” and the knowledge of such an agent bound the principal— Blackburn, Low, & Company v. Vigors, (1887) L.R., 12 A.O. 531, per Halsbury, L. C., at p. 537. Where one of two innocent parties had to suffer for the fraud of a third party—the agent of one of them—that one ought to suffer who trusted the person who knew the truth, and who had been put on his inquiry but had taken no steps to ascertain the facts— Ogilvie v. West Australian Mortgage and Agency Corporation, Ltd,. [1896] AC 257, per Lord Watson at p. 270. [Counsel for the reclaimers stated that after their Lordships' decision in Bowie's Trustees v. Watson, ante, p. 202, he could no longer maintain that the defenders were not bound to return the titles until the money advanced had been repaid.]

Counsel for respondents were not called upon.