POWERS OF ATTORNEY 
285 
Where an attorney acting within the scope of his authority Fraud. 
commits a fraud, the person who has been defrauded may 
hold the principal responsible, even in cases where the principal 
has not derived any benefit from the fraudulent activities of 
his attorney [Lloyd v. Grace Smith (1912), A.C. 716]. 
If, however, the third party is aware that the attorney is 
using his powers for his own benefit in fraud of the donor of 
the power, he will be accountable to the donor for any 
property so transferred to him by the attorney. For where 
the act of an attorney is on the face of it done for the private 
purposes of the attorney himself and not for the benefit of 
his principle, the third party cannot rely on the doctrine of 
‘apparent authority’ or claim protection as an innocent party: 
knowledge—that is to say, actual or constructive notice— 
affects the whole position [Reckitt v. Barnett, Pembroke & 
Slater, Ltd. (1929), A.C., 176]. 
What may amount to notice is illustrated by the case of 
Reckitt v. Nunburnholme (1929) 45 T.L.R. 629. The plain- 
tiff’s attorney, Lord Terrington, who was also the defendant’s 
solicitor, and collected her dividends and kept her pass book, 
drew a cheque on the plaintiff's banking account, payable 
to ‘life insurance or bearer’ and crossed ‘not negotiable,’ 
signing it ‘Sir Harold J. Reckitt by Terrington, his 
attorney,” and without informing the defendant paid it into 
her account at another bank. At his request the defendant 
then drew a cheque on her account, which would otherwise 
not have been in sufficient funds, in settlement of a trans- 
action between her and the attorney, who was in reality 
defrauding both her and the plaintiff. The plaintiff success- 
fully claimed the amount of the cheque from the defendant, 
on the ground that the latter, through the agency of her 
bank, had constructive notice that she had been credited 
with money belonging to the plaintiff, who was under no 
obligation to her (i.e. that the power of attorney was being 
used otherwise than for the purposes of the plaintiff's affairs) 
and that she was equitably bound to refund the amount b. 
which she had been thus enriched. 
Where a forged instrument induces contractual relations Forgery 
between parties ignorant of the forgery, and acting in an 
honest belief as to the genuineness of the document, it is the 
person that set the negotiations in motion by the intro- 
duction of the forged instrument who must bear the loss. 
Thus, where it became necessary to decide whether a bank 
or a stockbroker was to lose the value of stock improperly 
transferred through a forged power of attorney presented 
by the stockbroker, when both parties had acted in