POWERS OF ATTORNEY

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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