The House was asked as to the dishonest use of a cheque card. The appellant defendant was charged and convicted on two counts of obtaining a pecuniary advantage by deception, contrary to section 16 of the 1968 Act. The Court of Appeal (Criminal Division) upheld those convictions.
Held: Where a drawer of a cheque which is accepted in return for goods, services or cash, uses a cheque card he represents to the payee that he has the actual authority of the bank to enter on its behalf into the contract expressed on the card that it would honour the cheque on presentation for payment.
Lord Diplock said: ‘When a cheque card is brought into the transaction, it still remains the fact that all the payee is concerned with is that the cheque should be honoured by the bank. I do not think that the fact that a cheque card is used necessarily displaces the representation to be implied from the act of drawing the cheque which has just been mentioned. It is, however, likely to displace that representation at any rate as the main inducement to the payee to take the cheque, since the use of the cheque card in connection with the transaction gives to the payee a direct contractual right against the bank itself to payment on presentment, provided that the use of the card by the drawer to bind the bank to pay the cheque was within the actual or ostensible authority conferred upon him by the bank.
By exhibiting to the payee a cheque card containing the undertaking by the bank to honour cheques drawn in compliance with the conditions endorsed on the back, and drawing the cheque accordingly, the drawer represents to the payee that he has actual authority from the bank to make a contract with the payee on the bank’s behalf that it will honour the cheque on presentment for payment.
It was submitted on behalf of the accused that there is no need to imply a representation that the drawer’s authority to bind the bank was actual and not merely ostensible, since ostensible authority alone would suffice to create a contract with the payee that was binding on the bank; and the drawer’s possession of the cheque card and the cheque book with the bank’s consent would be enough to constitute his ostensible authority. So, the submission goes, the only representation needed to give business efficacy to the transaction would be true. This argument stands the doctrine of ostensible authority on its head. What creates ostensible authority in a person who purports to enter into a contract as agent for a principal is a representation made to the other party that he has the actual authority of the principal for whom he claims to be acting to enter into the contract on that person’s behalf. If (1) the other party has believed the representation and on the faith of that belief has acted upon it and (2) the person represented to be his principal has so conducted himself towards that other party as to be estopped from denying the truth of the representation, then, and only then, is he bound by the contract purportedly made on his behalf. The whole foundation of liability under the doctrine of ostensible authority is a representation, believed by the person to whom it is made, that the person claiming to contract as agent for a principal has the actual authority of the principal to enter into the contract on his behalf.’
Lord Diplock
[1977] AC 177
Theft Act 1968 16
England and Wales
Cited by:
Cited – Regina v Lambie HL 25-Jun-1981
The defendant had been requested by her credit card company to return her credit card and not to use it. She used it again before returning it. She was convicted of obtaining a pecuniary advantage by deception from the store, but her appeal was . .
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Updated: 17 June 2021; Ref: scu.471154