McLaughlin v Daily Telegraph Newspaper Co Ltd (No 2) [1904] HCA 51

hearing - Grounds for reversing Judye's finding. March 23, ; 7 i ee 24, 25, 28, 29, 3) A power of attorney executed by a lunatic who does not understand what April 27. ae

he is doing, such waut of understanding being known to the person who procures its execution, is void. {

'O'Connor, JJ. M., being insane and incapable of managing his affairs, but having lucid intervals, executed a power of attorney giving his wife absolute power to dispose of his real and personal estate. Acting under the power of attorney, the wife sold and transferred certain shares held by M. in the defendant companies, who had no notice

"of the insanity, to third persons who also had no notice. M., on recovering his sanity, rought suits against the defendants in Equity to compel them to rectify their isters by entering his name as holder of a number of shares equal to the number

sold, and also as holder of certain other shares to which he would, if he had mained the registered holder of the original shares, have been entitied in res; of them. Both suits were dismissed by the Chief Judge in Equity, who was of opinion, upon the evidence, that M. sufficiently understood the nature of the power of attorney when he signed it, and was of opinion, further, that, whether - he did or not, he was bound by the acts of the attorney.

On appeal, the Court found, on the evidence, that M., who had previously refused to sign any document, did not, when he executed the power of attorney, know that it was a power of attorney, and that this fact was known to the attorney

when she procured its execution. Held, that the power of attorney was absolutely void.

Held, further, that it was immaterial whether the defendants had or had

Held, therefore, that the transfers were invalid, and the plaintiff w entitled to the relief prayed.

Molton v. Camrowx, (2 Ex., 487; 4id., 17), Drew v, Nuun, (14 Q. 661), Imperial Loan Co. v. Stone, (1892, 1 Q.B., 599), considered and distinguis

'The liability of a lunatic to make restitution to the extent of the beni received by him considered.

'An appeal from the decision of the Chief Judge in Equity is a rehearin and in dealing with bis findings on questions of fact the Court will reconsider tht materials that were before the Judge, applying the rules laid down in Coghlan Cumberland, (1898) 1 Ch., 704.

Decisions of A. H. Simpson, C.J. in Equity, [1904] 4 8.R. (N.S.W.

AppEALS from decisions of A. H. Simpson, C.J. in Equity.

The appellant, on 24th October, 1900, signed a power 0 attorney in favour of his wife, authorizing her (inter alia) sell and dispose of all his real and personal estate, and to and also, if necessary, to seal and deliver all transfers and i ments whatsoever which to the said attorney should seem pedient. for that purpose, and stating that receipts, when in the appellant's name or in the name of his said attorney, sh exonerate the persons paying the same from seeing to the ap] cation thereof. Acting under this power of attorney, the attornt sold 118 shares in the Daily Telegraph Newspaper Compan Limited, on 15th and 26th November, and on 5th Decen 1900, and about the same time she also sold 1540 shares in

The appellant, on 7th August, 1902, was declared to be of unsound mind and ineapable of managing his own affairs, under sec. 102 of the Lunucy Act 1898, and a committee of his estate McLsveunin was duly appointed. On 10th March, 1903, a declaration was y,/" op made under see. 104 of the Lunucy Act that the appellant had oon ain recovered his sanity and was capable of managing his affairs. Co. Lap.

_ Later the appellant brought suits in Equity for the purpose of

compelling the defendant companies, the present respondents, to

rectify their respective registers, by entering the appellant as the

holder of a similar number of shares, and to pay to him the

dividends which he would have been entitled to receive, if his

me had not been removed from the respective registers. The

statement of claim charged that the appellant became ii in August, 1900, and that he was, to the knowledge of his wife, nsane at the time he executed the power of attorney, and that
e defendants respectively had notice of such insanity. It vas not, however, alleged that the sales of shares were at an nder-value or that the transferees had notice of the insanity. virtue of a special resolution of the defendants, the Daily elegraph Newspaper Company, Limited, providing for the se of capital by the issue of new shares, of which a certain roportion were to be offered at par to the existing shareholders

sfers. Since the said transfers the shares in both defendant ies had increased very considerably in value, and large nds had been paid on them.

only defences raised in the pleadings that it is necessary ite for the purposes of this report were: that the transfers

attorney of the appellant, and were presented to the defendants, - y and that they were bound to act upon them; that the appellant: did in fact execute the power of attorney, and that Ada A. McLaughlin had authority to transfer the said shares, and, if she - rp. had not such authority, the appellant, by executing the power of - McLavonuy attorney, ptt it in her power to make the said transfer, and - was estopped from denying that she had authority, inasmuch as eo ae the, power of attorney purported to be duly signed by th

Co..Lrp. appellant in his own name; that the defendants had no notice of

(No.2). the appellant's insanity, and the dividends upon the shares were

. paid to the registered holders of the shares. In the case against - the, Vale.of Clwydd Co. the further defence was set up that the proceeds of the sale of the shares were received by Ada A: Melaughlin, and spent vith other moneys in payment of the appéllant's debts; and for the maintenance and benefit of himself - and family. The appellant replied that he was of unsound min d at the.date of the alleged execution of the power of attorney, and unable to understand the effect of the deed when he wa: iniduced to sign. it, that the defendants were aware of the insani at the dates of the transfers, and that Ada A. paar had no power or authority to transfer. ys

The appellant by his counsel at the trial offered to pay to # defendant companies respectively the market value of the shares at the respective dates at which they were transferred from him to the respective transferees, adopting as the market value thé prices at which they were respectively sold.

The two cases were heard separately before the Chief Judge in Equity, in November, 1903, but judgment was reserved in first until the second had been argued, and both judgments wer delivered on 11th December, 1903. His Honor held, upon the evidence, that the plaintiff had failed to show that he did not understand the nature of the power of attorney when he executed it. His Honor was also of opinion that the plaintiff would b bound by the acts of his attorney, even if he had not unders' what he was doing when he signed the power. Both suits accordingly dismissed with costs, (1904) 4 S.R. (N.S.W.), 84

frordon, K.C., Knox and Watt appeared for the appellant in H.C. oF A.

cases. 1904. or nd did not know of the lunacy of the alleged principal." The betel

) cases last mentioned do not help them. ; [0'Connor, J. - In those cases there seems to be a departure om the old rule that a lunatic cannot make a contract at all, by afting upon the rule a qualification that in cases of that kind ie contract is binding on the lunatic unless the contractee has ud notice of the lunacy.]

The Court only decided that where a person contracts in fact h a lunatic, and does not know of the lunacy, the contract mnot be avoided. "That might possibly apply to the transaction en the donor and the donee of the power of attorney, but not-be extended 'so as to say that, where there is no valid ointment of an agent at all owing to the lunacy, yet the tic is bound by the acts of the pretended agent. If there is vathority there can be no contract.

Gkirrira, C.J. - Can the defendants say that they dealt with lunatic at all 7 |

[ Connor, J., referred to Evans on Principal and Agent, st ed. (1878), p. 10, citing Bevan v. McDonald.)

@ person claiming to be an agent is an absolute insurer of ity. The remedy of third persons contracting with him, if to have had no authority, is an action for breach of inty of authority, but the alleged principal is not bound in way. Molton v. Camroux and Imp. Loan Co. v. Stone are 'applicable to cases of bargain and sale, fair and bond fide s between principals in the ordinary course of business. y do not cut down the general laws of agency. It is a well lished prineiple of law that any person who is sued on a con- that purports to have been made by his agent can defend by the agency. It cannot be contended that a lunatic is the

1904. 'The defendants therefore must rest their case upon a representation MoLavenmy OF holding out by the lunatic, and I contend that a lunatie can

Daty ' : . Yeixcrarn [He then addressed himself to the evidence}. New

MeLavenuw Knox followed. The reason for holding a lunatic's contract Var or Void is that he has no mind, and therefore does not understand | es the nature of his act. He is incapable of knowing what he is

Co. Lrp. doing (Shelford on Lunacy, see. 3, cap. 6, p. 336, and judgment of -

(No.2) Bush, J., in Ball v. Mannin [supra]. His case is analogous i" those cases where, for various reasons other than lunacy, a_ man signing a contract does not know what he is signing. In_ those cases the contract is void and does not operate even as a

representation. It wa: the power of attorney was void, it was a representation by plaintiff which, when communicated to the defendants, estop) him from denying the authority of the donee. Buta man cann t do indirectly what he is incapable of doing directly. It is just if the signature were obtained from him by a misrepresentation as to the nature of the document. In such cases there can be no estoppel by representation; the document has no legal effect whatever, because the mind of the person signing was never al to what he was doing. The cause of the ignorance is immate In Lewis v. Clay, (14 T.L.R., 149), the defendant had si a promissory note and an authority to receive the proce

This ignorance was produced by misrepresentation. It was he in an action upon the note, that the defendant was not estoppe from setting up his ignorance even against a holder in due co without notice. The note was absolutely void, and the defendan could not be made liable upon it on any ground of holding out 0

ment signed by a person who has knowledge of its nature, has been induced to sign it by misrepresentation as to a collate matter. That would be merely voidable. The power of atto1

J ignorance of its nature. By analogy, therefore, it should be H. ©. oF A.

• treated as void and inoperative, not only as a contract, but also as

as a representation. [He cited, also, on this point, Foster v. Mot.

• Mackinnon, UR., 4 C.P., 704]. There was a second answer by defendants to our contention, viz., that they had acted as they "were entitled and bound to do by the articles of association ; ~ that they had agreed, by the articles, to act upon the plaintiff's McL power of attorney, and that this arrangement had been made y4yy or _ while the plaintiff was sane. But the articles speak only of the Chins ae "duly appointed" attorney, and therefore this answer is met by

our main contention that there never was a duly appointed - (No. 2).

attorney. Moreover, the directors were not bound to register B the transfer, they might have inquired and verified the agency. _ There is nothing, therefore, to distinguish this case from that of any other person dealing with an alleged agent. He takes the risk of there being no authority in fact.

Wise, K.C., for respondents, the Vale of Clwydd Coal Mining Co. Tassume for the purpose of my argument that the Judge below was wrong in his finding as to the insanity, but was right in holding that the defendants had no notice of it, and contend that, even so, the defendants were justified in acting upon the power of attorney. It is admitted by the plaintiff that Imperial Loan Co. td. y. Stone (supra) rightly decided that, where a contract is made by a lunatic, itis binding upon him as against third parties, unless they knew of the lunacy at the time of the contract. e contract to be looked at in this case is the contract made tween the plaintiff and the defendants when the plaintiff took

sfer by the plaintiff or his attorney, taking upon itself the rformance of a ministerial duty from which it derived no vantage. The company is bound to recognise a transfer signed by the plaintiff or his attorney. If, after becoming insane, he

H.C. or A. they would have been entitled and bound to act upon them, if 1904. they had no notice of the insanity. There can be no difference

nGaneree when the transfer is signed and presented by an attorney. bee [Grierirs, C.J. - If he is the "duly appointed " attorney. ]

TrLecrarn Plaintiff was sane when the original contract was made, i.e.

Co. Lrv, When he took the shar McLavenriw upon the assumption that he has continued to be sane. : (Grurrirn, C.J. - The representation of sanity is made at the 4 __time of making the contract. A representation that a member ; ~ of a company is sane when he becomes a member is not a

(No. 2). representation that he will so continue for ever.]

It is a reason for assuming that plaintiff will be sane when- ever he directs a transfer, unless we have notice to the contrary ; Drew v. Nunn (supra).

(Grirriru, C.J. - Are you not bringing in a contract with which we have no concern? The plaintiff complains now that you - transferred without his authority, and you answer that you had his authority under the power of attorney.]

We have to look further back, to the contract made when the es were taken. Defendants then undertook to transfer when

Drew vy. Nunn (supra) and Imperial Loan Co. v. Stone (supra) introduced a new rule based upon the necessities of business. It is clear from those cases that if the transfer had been presented by plaintiff himself, signed by himself, we should have been pro- tected in honoring it. So also in Molton v. Caumroua. There can be no difference in principle between dealings with plaintiff direct and dealings with him through an agent.

[O'Connor, J. - If this power of attorney had been executed by plaintiff during sanity, and placed with defendants, then on the authority of these cases, his supervening insanity would not have revoked it as against the defendants, but that is not the here.] .

Every man who has once been sane is presumed to continue sane | until the contrary is proved (Zaylor on Evidence, " Presumptions: of Immutability.") Making that presumption, defendants we bound to recognise the order of plaintiff's agent; In re Whitle} Partners, 32 Ch. D., 337. This rule is founded upon practi

convenience. Molton v. Camroux (supra) was not mentioned in H. C. or A. Dester v. Hall (supra). The validity of a power of attorney of a 8 lunatic is not impeached by the mere fact of the lunacy ; Ex parte yoLaventx Bradbury, 4 Deac., 202; 1 Mont. & C., 625; Stokes' ed. of Me

• Jarman on Conveyancing, 8th. vol. ul eo eee {Grirerrn, C.J. - Lunatic may mean either a man wholly incap- Co. Liv. 'able or partially so. In that case it was held that the inquisition McLaventix 'of lacy was not conclusive as to the man's capacity, and from v1) or other circumstances the Court took the view that he was sane.]} Gea The case is referred to in Stokes on Powers of Attorney in con- Co. Lrv. "nection with Molton vy. Camroux. The authorities show that - (No. 2). 'the contract of a man apparently sane cannot be avoided. [O'Connor, J. - Is there not a difference between the presump- tion to be drawn by a person dealing directly with the lunatic and that to be drawn by a third person from the, power of attorney ?] Personal communication between the contracting parties makes no difference to the legal effect of the contract. (Sturkey v. Bank of England, 1903 A.C., 114). The knowledge of the person deal- g with the lunatic is the test. (Campbell v. Hooper, 3 Sm. & G., 153; 24 L.J., Ch., 644). If the transaction is bond fide, and in "the ordinary course of business, then the person dealing with the Tunatie without notice is protected. Ifa person dealt with the assumed agent of a person apparently sane at his peril, the whole utility of the doctrine of agency would be gone. The Court should give weight to considerations of expediency, and have gard to the effect of a decision upon business dealings (Sheffield orporation v. Barclay, 1903, 2 K.B., 593). [Know referred to Powell v. London and Provincial Bunk, 1893, 1 Ch., 610.) _ The purchase by a lunatic at exorbitant prices was held good Wiell v. Morley, 9 Ves., 478. The principle applicable in this se is an extension of the equitable doctrine that a bonu fide aser for value without notice is always protected. It does hot rest upon representation, because a lunatic cannot represent. t is well illustrated in Imperial Loan Co. v. Stone (supra). It is not estoppel by conduct, although it resembles it. The equitable ine I have stated is the only principle reconcilable with

H.C. or A. Drew v. Nunn. 'Tf it is not adopted, there is no conceivable at principle upon which the deed executed by a lunatic can ever be - McLavemax held not to be void, since the doctrines of estoppel and represen- pay tation have no application. This power of attorney would have Tevecrarn to be treated as a forgery, absolutely void, and Drew v. Nunn eas would be wrongly decided. But if the efficacy of the contract McLaveurix depends upon the knowledge of the person dealing with the Varzor /unatie, we have a rational principle reconecilable with Drew vy. ate unn (supra), Imperial Loan Co. v. Stone (supra), and Molton" Co. Lav. . v. Cumroua (supra). All those cases regard the knowledge of - (No.2). the contractor as material, but if the contract was in itself void his knowledge or ignorance could not affect the question, and would be quite immaterial. The cases dealing with forgery, such _ as Lewis v. Olay, are therefore no guide here, because a forgery is always void, whereas the lunatie's contract is not necessarily so. Another way of stating the principle for which I contend is that a lunatic cannot deny his own signature where a contract hi been bond fide made and executed, by a third party, upon faith of it. [O'Connor, J - Do not the eases go to show that a lunatic is only prevented from denying his signature where there has bee something in his own conduct to mislead the other, just as may be the case in questions of forgery 7] Tf the circumstances are such as to justify a belief that contractor was sane, the contract is good. In this case it may be that the appointment was void as between the donor and donee, but as soon as it was acted upon by others ignorant of ed to be void ; Ward vy. Duncombe (1893), A! 369. The civeumstances here justified the defendants in belie that the power of attorney was properly executed. The document was properly signed and attested, a letter was written by tl clerk in plaintiff's office, giving the illness of the plaintiff as reason of its execution, and the defendants had no reason what- er to suspect that plaintiff was insane. It was therefore "fair and bond fide" transaction. Those are the words used i Molton vy. Camroux. They would be quite inappropriate i estoppel had been the basis of the decision. It is enough that # defendants were ignorant (Richardson vy. Dubois, L.RB.,5 QB.

(non. case cited in Hx parte McDonald, 1 Buck., 405; Vickers H.C. or A. Hertz, U.R., 2 H.L. (Se.), 113.) Both parties may be quite es innocent, and yet one of them suffers; Scholefield v. Earl of yctavewus Londesborough (1896), A.C., 514; Young v. Grote, 4 Bing., 253. aoe

fact that the transaction is usual and fair as between them Co.

w be evidence that the alleged lunatic knew what he was doing. McLavenuw ht not some principle like that explain the Molton v.Camroux yarh or The cases cited on the effect of forgery and misrepresentation Co. Lrp. ave no application to the case of a lunatic. (No. 2). [He then addressed the Court upon the evidence in the Vale of re

_ Lingen, for the respondents in both cases, followed. I admit that it is impossible to find a general principle of common law it will explain Molton v. Camrou, but the plaintiff h woceeding in Equity, and must be subject to its principles. Equity will not allow a lunatic in certain cases to deny his rep-

resentations. The principle is that ignorance of the lunacy and bona fides in the transaction is an answer to the plea of lunacy. The ignorance can only arise from an express or implied repre- sentation by the lunatic. Here there is an apparently sane act, signing of a formal and regular document, and the defendants ignorance acted upon the quasi-representation thus made by lunatic. The knowledge of the agent does not affect us. We re in the position of purchasers for value without notice. There Sno case in Equity to support the plaintiff's contention, and if e was any such doctrine at common law as that a lunatic's tract was void, that was upset by the decision in Molton v. rowke (supra). | (Grieriry, C.J. - On your argument a lunatic is in a worse 'ition than a defrauded sane man.] acy has been treated on a special ground in Law and in

ity, and the latter presumes a man to be sane as agains

Jide contractee, if there is nothing to indicate the luna, nacy does not make a contract a nullity, whereas forgery does. e same rules therefore cannot apply to both. The reason of

this is that it is so easy to feign lunacy, and none but an expert can detect the deception. To allow the plea of lunacy in all ca: would open the door to frand. It is, therefore, no answer unl there was also notice of the lunacy. In Equity, persons acting bond fide without notice on what they believe to be the instruction of those whom they are bound to obey, are protected; Leslie y Baillie, 2 Y. and Coll. C.C.,91. The eases cited for the plaintiff a cases in which the persons sued are assignees dealing of their own free will and able to inquire. The defendants here wer performing a ministerial office in obedience to an order good on th face of it. Inquiry would not help them, because nobody with certainty tell lunacy in a legal sense from sanity. 2 cases of infancy or insolvency are different, for they can be definitely ascertained. Bramvell, B., in Drew v. Nunn (supra) said that lunacy was not a privilege, but a misfortune, and inno persons were not to suffer by reason of it. The same rule applie to persons acting on fraudulent orders; Badcock v. Lawson, 4 QB.D., 394; Union Credit Bank v. Mersey Docks and Harbow' Board, 1899, 2 Q.B., 205. j

[GrirritH, C.J. - Molton v. Camroux would be exactly ana gous if the plaintiff had gone in person and presented tr

Seeing the lunatic would be of no value to a person who w not an expert; knowledge is the test of liability. Defendant have nothing to do with the relations between the attorney a the lunatic; (Story's Equity Jurisprudence (1853), par. 22 Unless they have taken advantage of the lunatic and are practically guilty of fraud they are protected.

(GrirrirH, C.J. - Getting a lunatic to sign a document whieh h does not and cannot understand is in the nature of fraud.]

In Campbell v Hooper (3 Sm. & G., 153), the lunacy was ta for granted, but it was held not to attect the rights of a mortg: and both parties, in that case, acted through agents, Equity 0 only interfere to set aside a contract where there has been frau on the part of the defendant, and the original position can b restored (Hassurd vy. Smith, 6 LR., Eq., 429; Niell v. Morley, Ves., 478; Price v. Berrington, 7 Hare, 394; 3 MeN, & G. Greenslade v. Dare, 20 Beay., 284; Bassett v. Nosworthy, White w

dor's Leading Cases in Equity, vol.I1., p.1). Ina proceeding H. ©. or A. under this section of the Companies Act the Court is bound to Bsr weight to every equitable consideration (Ze parte Parker, Metavenus R.,2 Ch., 685 ; Buckley on Companies Acts, 8th ed.,p.28). The p.i. intiff here has received the benefit of the transfer, the proceeds aa ee ing been devoted to payment of his debts and expenses. The Co. Lr. rinciple upon which the Court of Equity will act in granting McLaveuny elief is that where the lunatic's estate is practically unchanged y,/¥ oy

e is not entitled to relief, but where he has suffered by the trans- ayes ss

ction he will be relieved (Pope on Lunacy, 2nd ed., pp. 252,254). Co. Lrn. Molton v. Camroua is inconsistent with Dexter v. Hall (supra), (No. 2).

apparently" to the promisor, not to those immediately sur- ounding the lunatic, because the Judges in all the cases have ealt only with the state of mind of the defendant, treating the otoriety of lunacy in the neighbourhood as immaterial. Public icy and common sense require that the equitable doctrine as 0 a bond fide purchaser for value should be applied to the mtracts of lunatics.

(Grirrrru, C.J. - That doctrine might be applicable if this uit were against the purchasers of the shares. Some of the eems to go as far as that, eg., Swan v. North British Aus- sian Company, 2 H. & C., 175. Here the question is - the company done its duty to the plaintiff?" ]

indley on Companies, in dealing with Ex parte Swan, 7 C.B.

ks to have rectified, a mandamus will not be granted. But ity will not relieve, even where there is no negligence, if the y seeking relief has had the benefit of the transaction. of Equity are not bound to follow the rule of Courts of Ex parte Parker (supra).

H.C. or A. for value without notice. There is no direct authority coverin;

1901, our case, but at any rate there is none against us. Therea are . . McLavenras cases having some analogy to this, where there is no estopp

Rice money paid, it was contrary to natural justice that he sho i Co. Lrp. recover it. The same rule is applicable here.

(No (GrireirH, C.J. - Could not the Court order the appellant ~~ repay the money arising from the sale ? ]

The transferees are not parties to this suit, and the cours adopted in Starkey v. Bank of England (supra) could not adopted here, as there is no way of bringing in third parti We have parted with the shares bond fide, and the lunatie received the benefit. His incapacity is therefore immaterial.

[Grirriru, C.J. - The enjoyment of the proceeds only ope as a ratification. How can a lunatic ratify ? ]

[Barroy, J. - Ratification is based upon the voluntary accep ance of the benefit.) :

The lunatic here is in no better position than in Molton Camroux. The money has been expended in necessaries, as Baxter v. Earl of Portsmouth (1826), 5 B. & C., 170. Lewis Clay, 14 T.L.R., 149, is no stronger than Foster v. Mackinno (supra), and the latter case was not even mentioned in Jip Loan Co. v. Stone (supra). In Tarbuck v. Bispham, 2 M. & ¥ 2, the defendants knew that they were acting with the profes agent of a lunatic, whereas here the defendants had no notice ( the lunacy.

[GrirrirH, C.J. - Story on Agency seems to treat it as doubt! whether the doctrine you contend for would afford a good answt to a bill for relief in Equity.) E

In Ball v. Mannin,1 D. & CL, 380, there was no suggesti¢ that any of the parties were ignorant of the lunacy. In all # cases cited in which the defence of lumacy was upheld, there w notice of lunacy or suspected lunacy, either to the defendants to the persons from whom they purchased. In Deater v.

) the point as to ignorance on the part of the purchaser H. ©. or A. ind fair value paid was never raised, and the lunacy was Sao jotorious. The purchaser may have known it. Moreover it \oLaventiw follows cases that are treated as doubtful in Molton v. Camrour yy.

• ieee (Grirriru, C.J. - Cundy v. Lindsay, 3 A.C., 459, was a case Co, Lro. ween two innocent parties, and the House of Lords followed Mc Laventis the rule of law that, if there was areal contract to begin with, the y,7) op subsequent dealings could not be questioned. But the question , Cwrpp

Coan Mrixine is whether there was a contract at all.] Co. Lap. We say there was, because the lunatic cannot dispute his (No yriting as against us, whether he understood it or not. = As to the fact of lunacy, the Judge below has found on the evi- dence that the appellant understood the nature of the power of ttorney, and, where that is so, the Court of appeal will not verse his finding unless they are absolutely satisfied that he yas wrong. (Colonial Securities v. Massey, 1896, 1 Q.B., 38). [Grirrirx, C.J. - Every Equity appeal is a rehearing. We st act on the principle that, if we are satisfied that the finding wrong, we must reverse it. In cases of appeal against the ict of a jury the reasons for a reversal must be stronger. The ict must be demonstrably wrong. ]

We admit that appellant was subject to insane delusions, but not that he was so insane as to be unable to understand the ocument. A lunatic in an asylum and in bonds may be capable f executing a document (Selby v. Jackson, 6 Beav., 192). Connor, J. - Assuming it is proved that appellant was enerally insane, with lucid intervals, is not the onus of proof to those who are seeking to substantiate the documents. Is it not upon them to show that the documents were executed ing a lucid interval 7]

(Gordon, K.C., referred to Hall y. Warren, 9 Ves., 610.]

es, but still the plaintiff has to establish his case (Greenslade

• Dare, 20 Beay., 285), and, as he has to prove fraud on the part { the donee, the onus rests on him still.

'(Grirrrra, C.J. - You contend that it is not fraud to get a hatic to sign a document of which he did not know the nature.]

McLaveuts attorney, but whatever obligation he can undertake for himself he

_. representations made to the person signing a document. In law, . a lunatic is as a dead man, but in fact he is allowed to go at

Sheppard, for the respondents, the Vale of Clywdd Coal Mining Company, Limited, followed. A lunatic cannot execute a power of |

can undertake by his agent. Having no mind, he cannot enter into' a contract, nor can he represent a person to be his agent. For the same reason he cannot have a representation made to him. His case, therefore, cannot be brought into the same class as Lewis y. Clay (supra), and others in which the decision turns upon mis-

large amongst men, and enter into relations with them, his - lunacy being often unsuspected. Owing to this, complications arise, and the law has endeavoured to deal with them by modifi- - cation of the doctrine of absolute incapacity. He is therefore made liable to all the disabilities of a sane man, but treated as one of weak intellect, and only made liable where no advantage has been taken of his insanity. He is protected against dishonest a unconscionable bargains. It was a canon of the civil law that all his contracts were void, but the necessities of modern busin have caused modifications of the rule. Molton v. Camroua (supra), is an attempt to harmonise the old rule with mode requirements. His contracts are therefore voidable and not void, and that is in his favour (Pope on Lunacy, 243, 244), since can affirm those which are profitable, and have the burdensome disallowed. In Dexter v. Hall (15 Wall., U.S.A., 9), the Americar Courts went back to the old authorities, and adopted the old that is no longer rigidly applied in England.

(Grirrirx, C.J. - Do you admit this proposition, that a lunati¢ has a qualified capacity to contract, but the validity or invalidi of his contract depends on the question whether it was induced by fraud or not 7]

No. I admit that a lunatic, as a general rule, cannot contra with the modification that as he is amongst us in society, if th interest of society requires it, he must be bound by his con' in certain circumstances.

(GrirrirH, C.J. - Again, do you admit that generally speaki is fraud to induce a lunatic to make a contract if the pers inducing him to make it knows him to be a lunatic 7]

Yes, with the qualification that I have stated. H. ©. or A. _ [Grirerra, C.J. - Then is this fraud one which goes to the bie 'substance of the contract, making it void ab initio, or is it only ye Lavenus

ake it void against innocent third persons ?] sees Much depends upon the degree of lunacy. If it is of a minor "Co. Lrv.

avee and the lunatic has some understanding, the contract would McLavenus good or bad, according to whether the person dealing with him : taken advantage of the lunacy or not. If the lunacy is com- ete, and there is no capacity at all, then another test must be Co. Lav. pplied. No representation can operate on such a mind, and (No. 2). sequently the rule as to misrepresentation can have no pplication. Any person dealing with such a lunatic, knowing of the lunacy, is primd facie guilty of fraud, and the Court avoids contract. But, if there is no knowledge of the lunacy, then Molton v. Camroux applies, if the contract is fair and proper, and good consideration has been received by the lunatic. Ignor- ice of the nature of a contract is not sufficient of itself to avoid it; Foster v. MacKinnon (supra), Thorogood's Case (2 Rep., 9 b), and Lewis v. Clay (supra), are special exceptions. The only difference between the case of contracts of sane men and 'insane men in this respect is that fraud is more easily proved in

the dealings obtains the lunatic's signature to a document. w can a third person who deals with that person on the ith of the fraudulently obtained signature be in a better position than the person who actually dealt with the lunatic ? ]

_ In this way, that the lunatic must not be in a better position 4 sane man, and a sane man cannot deny the agency if he S given it owing to a misrepresentation.

(Grirriru, C.J. - He is only bound when the misrepresentation sas to a collateral matter. ]

Pollock on Contracts, 4th ed., p. 87, says that the latest opinion

H.C. or A. js that a lunatic's contract is voidable at his option if his state be eae known to the other party. The power of attorney is on the same McLaventrs footing as a contract with the lunatic himself. It is a contractual Dany Tepresentation to everybody who acts on the faith of it, and pane everybody so acting is practically dealing with the principal; Co. Lro. Drew v. Nunn (supra) has established an exception to the - MeLaveunw general rule as to lunaties' contracts, and has decided that a_ lunatie's power of attorney may be safely acted upon by any «¢ Person who does not know of the Imacy, even though the donee | "may have known of it. The power of attorney, as a represen- tation of the agency, continues until notice of the lunacy, and the lunatie's remedy, if he has any, is against the donee (Hor ood v. Simpson, 2 Vern., 186). In Dexter v. Hall (supra) it was not shown that the heirs ever received the proceeds of the sale; consequently the equitable principle of Molton v. Camroux and other cases did not come in. [He referred also to Domet, Civil Law, p. 466, par. 1129], As to the facts: The evidene does not establish general insanity, but recurrent delusions, leaving the patient capable of transacting business in the intervals. The fact of signing shows that he was not. sufferi _ at the moment from delusion, because the medical evidence to the effect that he could not be induced to sign anything while the delusions were active. There was no evidence of intent to defraud.

Gordon, K.C., in reply. As to the facts, there was no need prove intent to defraud. The motives of those who induced lunatic to sign are immaterial if they were aware of the lun The whole of the evidence shows clearly that the appellant was too insane to understand the nature of his act, the med evidence being that the act of signing must have been purely mechanical. There was no evidence even that the document was read over to him. General insanity was proved, and the defendants failed to discharge the onus thereby cast upon them of proving that the document was signed during a lucid interval (Hall v. Warren, supra).

As to the law, the defendant's argument as to the contract m de when the shares were taken has no application. We say that

They say that they did so in accordance with our request, and ve reply that the alleged request was uot ours at all (Sloman v. Bank of England, 14 Sim., 475). It is the duty of the company

ordered to rectify it, the onus being on them to justify the removal of the name (Lindley on Companies, 3rd ed., p. 147). The principles upon which mandamus will be granted are the same as those upon which a Court of Equity will act in granting relief. If the applicant for relief has not been guilty of negligence or of any conduct conducing to the fraud, the Court will relieve him (Ee parte Swan, 7 C.B.N.S., 400; Swan v. North British Aus- tralasian Co.,2 H. & C., 175). The appellant here could have pleaded " non est factuwm" to an action on the deed, as he had no consenting mind. There is no distinction between the principle of this case and that of Lewis v. Clay (supra). The power of ttorney is void ab imitio. The distinction between void and voidable contracts in this connection is shown in Union Credit Bank v. Mersey Docks and Harbour Board, (1899) 2 Q.B., 205. Lhompson v. Leach (3 Salk., 800; 3 Mad., 296) was not touched by Molton v. Camroue. Campbell v. Hooper (3 Sm. & G., 153), ided only that a plaintiff who sets up lunacy must either fail in obtaining relief or give up the money that he received as con- Sideration. In that case he actually had the money. The defendants can only escape from their difficulty by alleging stoppel by representation. But there can be no representation ept by a person who is capable of intending, and does intend, torepresent (Swan v. North British Australasian Oo., supra). In len v. City Bank, an unreported case in the Supreme Court of New South Wales, a cheque was held to be altogether void because the maker believed himself to be drawing a cheque for a different u The letter in Lewis v. Clay (supra), did not operate as 4 representation, although signed by the defendant himself. In

ell v. Morley (9 Ves., 478) there was contradictory evidence, and the Judge found in fact that the lunatic attended at the sale | asane person, thus bringing the case into line with Molton v. mroux (supra). In Greenslade v. Dare, 20 Beav., at p. 238, the of Equity held merely that the proper remedy was at law,

o keep the register accurately, and if it is incorrect they will be ;

were on the register, and defendants wrongfully removed us. H. ©. or A.

H.C. or A. 1904. a McLaveutin vw Dairy 'TELEGRAPH NEwsPAPER Co. Lrp.

by action of ejectment, and that it had no jurisdiction to gran such relief. Hx parte Bradbury (Mont. & Ch., 625; 4 Deae., 202), decided only that the finding of a commission in lunacy was not conclusive, if the sanity came in issue in other proceedings.

Lingen, on the question of the proceeds having been applied in purchase of necessaries for the lunatic, referred to Pope on Innacy, p. 257 ; Nelson v. Duncombe (9 Beav., 211).

Grirritn, C.J. This is a suit brought by the plaintiff for the rectification of defendants' share register by entering his name as a holder of 118 shares of which he was formerly the holder, and by registering him as the holder of certain other shares to which he would, if he had remained the registered holder of the 118, have been entitled in respect of his ownership of them. The plaintiff also claimed dividends withheld from him in respect of all the shares since his name was omitted from the register Defendants are a joint stock company, registered in New South Wales under the Companies Act 1899, and the suit is brought under the provisions of see. 232 of that Act. The obligation of the company to its members with respect to shares is a dul against a breach of which relief may be had in a Court of Equity, just as in the case of stock (see Sloman v. Bank of England, 14 Sim., 486). The plaintiff is entitled to say to the company: adopt the words of Shadwell, V.C. (p. 487) - * You are bound by law to be my bookkeeper in respect of my stock, and to show me the true account of it, and if I can show that on a given stock stood in my name, and now show that it does not stand my name, and I have not authorized the transfer of it, youa responsible to me - that is to say, you must make the account stand as it ought to have stood." (See also Barton v. L. and N.W. Railway Co., 38 Ch. D., 144, per Cotton, L.J., at p. 149, n per Bowen, LJ., at p. 153; and Barton v. North Staffor Railway Co., ib., p.458). This language, which was used of Govt ment stock, is equally applicable to stock ina joint stock comp

ntiff, then, having established that he was, before the transfers to be directly mentioned, registered in defendants' register as the holder of the 118 shares in question, the onus is cast on the

y plaintiff's authority. This onus they attempt to discharge by ying that they omitted the plaintiff's name from the register, and registered other persons in his place, in good faith in pursuance of transfers executed by his duly-authorized agent, ting under a power of attorney executed by the plaintiff, and g oduced to them as the plaintifi's deed. The plaintiff replies that the power of attorney, though executed by him in fact, was executed at a time when he was of unsound mind. The defend- ants do not dispute that at the time when it was executed he ; in one sense, of unsound mind, although the degree of unsoundness is in controversy. But they contend that his insanity is, in any view that may be taken of its degree, imma- ial, and that the power of attorney is binding upon him, even if his mind was so unsound at the time of execution that he did not understand what he was doing. The case was very well and fully argued before us, and a great number of authorities were eferred to, from which some rules appear to have been clearly ablished, while other questions appear to be still open for Judicial decision. _ For the plaintiff it was contended that a person of unsound mind is incapable of appointing an agent, or of executing a deed, that such an appointment or deed is absolutely void. The endants contend that this doctrine, if still true in any sense, is not applicable to the case of a power of attorney, at any rate $ regards persons who have in good faith dealt with the apparent it without notice of the unsoundness of mind of the principal. is necessary, therefore, to examine the cases in detail. n Turbuck v. Bispham (2 M. & W., 2), and Stead v. Thornton B. & Ad., 357 (n)), it was laid down generally that a lunatic is ; competent to appoint an agent. In both cases, however, the rson as against whom the question of incapacity was raised pears to have known of the incapacity. In Drew v. Nunn (4 D., 661), the defendant who had, while sane, authorized his

defendants to show that the change in the register has been made NEWSPAPER

and, in our judgment, is also equally applicable to, shares. The H.C. or A.

wife to act as his agent, became insane, and the question was _ whether the authority was revoked by the insanity. Brett, LJ. held that the insanity, assuming it to be such as to be apparent to anyone with whom he might attempt to enter into a contract, put an end to the agent's authority, and that, if there were no more - in the case, the defendant would not be liable on contracts made by his pretended agent, but that the agent would be liable for breach of the implied warranty of authority. Bramwell, LJ, expressed the opinion that in order to annul the authority of an_ agent, insanity must amount to dementia, but doubted whether - partial derangement would have that effect. Cotton, L.J., re- frained from expressing any opinion on this point. But all the Lords Justices held that plaintiff having, while of sound mind, - held out his wife as his agent, had entered into a contractual representation with persons who acted on the faith of the holding out, and that he was bound by this representation until the persons dealing with the agent had notice of revocation of the authority. These were the only English authorities cited to us directly bearing on this point. On the question of the capacity of a person of unsound mind to execute a power of attorney, the case of Dexter vy. Hall (15 Wall., 9), decided by the Supreme Court of the United States in 1872, was cited. In that case o1 Hall, alleged to have been at the time a lunatic, executed a pow of attorney authorizing his brother-in-law to sell land. The land was sold, and conveyed under the power to persons who after- wards conveyed to the defendant. After the death of Hall, his representatives brought an action of ejectment to recover pos sion of the land. The case was tried with a jury in a Cireuit Court of the United States, and evidence was offered on both sides on the question of the sanity of the alleged lunatic. The Cireuit Court directed the jury that, if at the time Hall execute the power of attorney he was insane, and his insanity was general the instrument was a nullity, and no title could be transferred under it, and that in that case the plaintiff was entitled to a verdict ; that it mattered not, if such were the case, what col sideration might have been paid by the attorney, or with v good faith the parties might have purchased; that the ins ment in such case was no more to be regarded as an

Hall than if he were dead at the time of its execution. H.C. or A. he jury found for the plaintiff, thus finding that Hall was )%* ne. The Supreme Court held that the direction was right. MeLavennax he Court, in their judgment, delivered by Strong, J., care- fully examined the early English cases, citing the comments of ee 2 Lord Coke on Beverley's Case (4 Rep., 123b) - * There is a great Biot Lrp. ifference between an estate made in person and by an attor- McLavenzis

ney, for if an idiot or non compos mentis makes a feoffment vary or Ciwypp

fee or in person and dies, his heir within age, he shall not be «CYR x. in ward, or if he dies without heir the land shall not escheat, Co. Lro. Dut, if the feoffment be made by letter of attorney, although the - (No. 2). feoffor shall never avoid it, yet after his death as to all others, in judgment of law the estate is void, and therefore in such case if

the heir be within age he shall be in ward, or if he dies without

heir the land shall escheat." They also referred in detail to Thompson v. Leach (Carthew, 435), and Ball y. Mannin (1 D. & Cl., 880), decided by the House of Lords in 1829, and came to the conclusion that it was the settled law of England, which y avowedly followed, that, while the feoffment of an idiot or atic is only voidable, his deed, and especially his power of uttorney, is wholly void. In Ball vy. Mannin the question was hether a deed to lease the uses of the land upon a fine and overy, which was executed by one J. S. Ball, alleged to be a atic, was void. The person entitled to the land if the deed s void brought ejectment against the person entitled under it. e Judge directed the jury that the question for them to try s whether "the said Ball was a person of sound mind or not, that, to constitute such unsoundness of mind as should avoid deed at law, the person executing such a deed must be incapable f understanding and acting in the ordinary affairs of life; that it Was not necessary that he should be without any glimmering reason, but that it was sufficient if he was incapable of under- nding his own ordinary concerns, and that, as one test of such pacity, the jury were at liberty to consider whether he was ipable of understanding what he did by making the deed in stion, when its general purport was generally explained to m." The House of Lords held that the direction was right. | this case no consideration had been given by the persons

H.C. or A. claiming the land. On the other hand, the. question of know- eee ledge of the insanity by the persons who induced the Iunatie to 4 MoLaventay execute the deed was not treated as material. In this case,as _ e well as in that of Dexter v. Hall, the fact of insanity seems to

have been regarded as the only material question. In Jenkins v. Morris (14 Ch. D., 674), a person alleged to be of unsound mind McLavenniw had executed a lease. After his death his legal representative - contended that the lease should be set aside, and an issue was directed to try the question " whether the lessor was or was not

Coan Mixixe i . Sieh Co. Lev. of sound mind, and capable of managing his affairs at the date of

(No.2). the lease." Evidence was offered on both sides, and Lindley, J., before whom the issue was tried, told the jury that the question for them to try was a practical question - whether the lessor was - so insane as to be incompetent to manage his affairs in the sense of disposing of his property - even of property believed by him : to be full of sulphur. (This was the peculiar delusion on which the allegation of unsoundness of mind was mainly based). A new trial, on the ground of misdirection, was refused by Hall, V.C.,_ and the Court of Appeal (Jessel, M.R., Baggallay, LJ., and Bramwell, L.3.) In this case also, the validity or invalidity of the deed was treated as being dependent upon the mental con- - dition of the person by whom it was executed. No question of knowledge or want of knowledge of his condition on the part of the lessee was raised.

In addition to these cases may be mentioned Howard v. Dighy (2 Cl. & Fin., 634), decided by the House of Lords in 1834, to which we have been referred by counsel since the close of the argument. Lord Brougham, L.C., in the course of his opinion (at p. 661 of the report), said : - "The law on this point, at least, is as clear both in Equity and in Lunacy and at common law, as that a man's eldest legitimate son is his heir to freehold land. A lunatie cannot bind himself by bond or by bill ; a lunatic eanni release a debt by specialty; cannot be a cognisor in a statute merchant staple, a judgment, warrant of attorney, or any oth security, I admit; but that a lunatie cannot receive payment of a debt, cannot receive moneys worth, and thereby make him! his executors, and administrators, that is, his assets, liable in di charge for what he has received, I hear to-day for the first tim

and, again (at p. 663): "These cases . . . . all show thata H.C. or A. _ lunatic, whose silence would be no consent, whose acquiescence eS ; would not be a waiver, whose obligation by a bond would not yicLavenns bind him, may nevertheless, by receiving the property of another, pv... _ and using it for his own benefit, or, as in this case, by receiving Teurcrarn

: Newsrarrk clothes, or the value in payment for millinery, or repairs of Co. Lrv. articles of dress, so far bind himself to the person who pays for McLaveutiw the goods as to enable the latter to set off the money so paid for y4)t or

• the Junatic against a claim in our Courts in pari materia." foray tae There is no doubt that a person of unsound mind may, in some Co. Lrp. cases, be held liable upon a quasi-contract, or obligation implied - (No. 2). _ by law, as for necessaries supplied to himself or his wife. (See
• Baxter v. Earl of Portsmouth, 5 B. & C., 170.) But no case was cited to us in which a deed executed by a person of unsound mind, in the sense that he was incapable of understanding what he was doing when he executed it, has been held valid. On the other hand, the proposition that a power of attorney executed by a "person of unsound mind is void is still contained in the text books as one of the propositions as to which the law is settled. ' The doctrine mentioned by Lord Coke, which precluded a man, "under some cireumstances, from alleging his own insanity, appears -tohave been a mere rule of pleading. It has long been discredited, _ and, indeed, it seems never to have been applicable in cases in which the question could be raised by the plea of now est factum (Sugden on Powers, 179, cited in Dexter v. Hall, at p. 24). So far the authorities appear to favour the plaintiff's conten- tion. We now come to another class of cases relied upon by the defendants, as either over-ruling or materially qualifying the doctrines apparently established by the cases already referred to. It was contended that the invalidity of a deed could not be Set up in a Court of Equity as against a purchaser for value 'ithout notice, and some cases were mentioned in which that lefenee was held good when the deed was impeached on the ground of the insanity.of the person by whom it was executed. ut, on examination it will be found that in every instance the made by the plaintiff - indeed, the only case which would ve entitled him to invoke the aid of the Court of Chancery - sumed that the legal estate was in the defendant, i.c., that the

MecLaveniin v. 'VALE OF Criwypp Coan Minixe Co. Lr.

deed sought to be impeached was not void but merely voidable, If the deed had been void, the remedy would have been at law. It is not clear, however, that the doctrine of purchase for value - without notice has any application in a suit for specific relief such - as the present. Of the other cases cited for the defendants the most important are Molton v. Camroux (2 Ex., 487, 4 id. 17)and Imperial Loan Co. v. Stone (1892, 1 Q.B., 599). The latter case was an action on a promissory note signed by the defendant as a surety. The jury found that the defendant was insane when he signed it, but could not agree on the question whether the plaintiff's agent, - who was present when the note was signed, was aware of the incapacity. It was held by the Court of Appeal that the defendant was not entitled to judgment. This case has sometimes: been regarded as an extension of the doctrine of Molton y. Camroux, which had laid down that an executed contract of which a lunatic, a party to it, had received the benefit, could not be impeached if the other party had no notice of the insanity. The principle of the decision seems, however, to be the same in both cases, which, in our judgment, establish that a contract made by a person actually of unsound, but apparently of sound, mind with another who deals with him directly, and who has no knowledge of the unsoundness of mind, is as valid as if the unsoundness of mind had not existed. If the man dealing with the person of unsound mind is aware of his insanity, the contract is voidable at the option of the latter, but the party who takes advantage of the other cannot himself set up the incapacity. In this respect the matter is treated on the same footing as cases of fraud inducing a contract. There is, indeed, authority for saying" that the equitable doctrines governing the validity or invalidity of a contract made with an insane person are only a partic

instance of the general doctrines relating to fraudulent contra In the cases last mentioned no unfairness of dealing could be imputed to the persons who sought to take advantage of contract, which was, in fact, made, in each ease, with an apparent sane person. The principle appears to be that the validity of contract made with an apparently sane person is to be determ! by the application of the same rules as are applied in ordinary cases. As pointed out by Bramwell, L.J., in Drew y. Mt

nd, it does not impose any additional disability, so that any umstance which would avoid a contract or transaction betw 'sane persons is, in our opinion, equally applicable to contra

ibject matter, or to sign a document of a particular character, is induced by false representation to make such a contract, or to sign such a document, intending to do so, the contract is yoidable as against the party who is guilty of the fraud, but is id as regards an innocent third party who acts, to his prejudice, on the faith of the validity of the contract or document. On the

• hand, if a party is induced to make a contract, or to sign a locument, by a misrepresentation as to the nature of the contract locument, that is to say if, although he in fact appears to ike the contract, he has no intention of doing any such thing, or e signs the document not intending to sign such a document, in either case to do something else, the contract or document is void and not merely voidable, even as regards innocent third ies, unless some negligence or default can be imputed to him. Jf this distinction, Thorogood's Case (2 Rep., 9b.), Foster v. McKinnon (LR. 4 C.P., 704), Lewis v. Clay (14 T.LR., 149), Oundy v. Lindsay (3 A.C., 459), afford good illustrations. Thorogood's Case the party was induced to execute a deed, it from illiteracy or ignorance did not know it to bea deed. In er v. M'Kinnon a man was induced to endorse a bill of change under the belief, fraudulently induced, that he was ing a guarantee. In Lewis v. Clay the defendant was induced fraudulent representations to sign two promissory notes, and a letter authorizing the person guilty of the fraud to receive proceeds. In Cundy v. Lindsay the party was fraudulently ed to think that he was making a contract with an entirely nt person. In each case the contract or document was held lutely void, even as against innocent third parties. Lord 8, L.C., in Cundy vy. Lindsay pointed out that in such cases Court is called upon to discharge the disagreeable duty of mining, as between two innocent parties, upon which of them

ween persons of whom one is insane. Contracts made between Rs ons apparently sane may be either void or voidable. If a Co. on intending to make a contract with respect to a particular Mc Lavenniw

nity is not a privilege but a misfortune. But, on the other H. ©. or A.

the consequences of a fraud practised upon both must fall. = Sheppard attempted, very ingeniously, to distinguish these cases: on the ground that in each of them the person who was induced - to make the contract, or sign the document, was so induced by. actual fraudulent misreprésentation as to the nature of the con- tract or document itself, and that, as it is impossible for a misrepresentation to operate upon the mind of a person who has no sound mind, there can be no inducement in such a case. But

contract or signature is induced by an active fraudulent mis representation as to the nature of the act, but that the mind the actor does not accompany the act. (See per Lord Cai LC. 3 AC. at p. 465). Thus a signature to a promissory note obtained by a conjuror with innocent intent from a person who supposed he was signing his name - say to a photograph or visiting card - would no more bind him than if the signature had | been obtained with fraudulent intent. The question, it is could never arise for decision unless a fraudulent use were sough to be made of the signature. Such a use might be made eithe by the person who fraudulently obtained the signature, or by person who became possessed of a signature innocently obtain In either case it would be equally void so far as regards creating a contractual obligation.

If, however, any negligence or breach of duty can be impute to a person who so gives his signature, he will be bound a regards innocent third persons who have acted to their prejudice on the faith of it.

We think that these considerations are equally applicable to the case of a person of unsound mind, and that, if such a perso is induced by another to go through the form of making a tract or signing a document without understanding what he i doing, he is not bound by his contract or signature, unless, ind the person who so induces him believes him to be of sound If he does, there is an exception, and the doctrine of Molton y. Camrour and Imperial Lown Co, v. Stone applies. If he doe not, the doctrine has no application.

Whether this exception applies to the case of a deed or po of attorney seems to be still open todoubt. It is settled law th

we axe two classes of cases in which a simple contract or quasi- H. C. or A. tract made by a person of unsound mind is valid. First, the ee e of obligations implied by law, such as an obligation to pay Mex. for necessaries supplied to himself or family. This liability stands

' 3 NEWSPAPER n of unsound mind with another person who is not aware of his Co. Lrp.

apacity. In this case, also, public policy seems to be the founda- MeLavennix n of the doctrine (Hlliott v. Ince, 7 D., M. & G.,475, at p. 487). vats or

is and powers of attorney executed by a person of unsound ier, d may, perhaps, stand on a different footing. So far as powers Co. Lrp.

of attorney are concerned, it is useful to refer to the case last (No. 2).

cited, in which Lord Cranworth, L.C., points out that the doctrine of Molton v. Canvroux has no application in a ease in which there is no contract for value, but merely a dealing by a lunatic with $ own property without any consideration passing from others, ich, in one sense, is the case when he merely executes a power of attorney not coupled with an interest. And, in view of the xpress decisions referred to in the first part of this judgment, there is certainly some difficulty in extending the doctrine of Molton v. Camroux, and Imperial Loan Company v. Stone to e case of a power of attorney or any other appointment of an gent. Nor, so far as we are aware, have they ever been so extended. In the view, however, which we take of the facts of case, it is not necessary to decide this question. For the est extent to which they could be carried in such a case ould seem to be that if the agent, being directly appointed, has no knowledge of the unsoundness of mind of his principal, the ppointment is good as between principal and agent, and, ossibly, as between the principal and an innocent third party ling with the agent. In such a case it would seem that the gent would, at any rate, be entitled to an indemnity from his ipal for any act done under the authority. But if the agent hows of his principal's incapacity - that is to say, knows that h alleged principal does not intend to appoint him as his agent - doctrine of Molton v. Camrouw and Ti mperial Loan Company fone can have no application as between them. In the course he argument, the case was put of a man induced to sign a of attorney by a representation that it was a will drawn

H.C. or A. in pursuance of his instructions. We cannot but think that such

1904 a power of attorney would be absolutely void, in'the absence, Borer a

that is, of negligence or default on the part of the person who signs it. We are, therefore, compelled to the conclusion that the question whether a power of attorney given by a person of unsound mind is void or voidable (assuming that it is nob rily void) is to be determined on the same principles as in » of a power of attorney given by a sane person, and that, - s shown that the insane person did not know what he was

nec the ¢ if it "doing, i.e., that he did not intend to execute a power of attorney, - and the person who procured the execution was aware of the fact, | it is absolutely void. In such a case any person setting up the authority must be bound by the ordinary rule that it is for the party alleging agency to prove it; and in the case supposed he can no more prove it than if the power of attorney had been a forgery, as in the case of Oliver v. Bunk of Englund (1902, Ch., 610).

It is said, however, that in such a case the power of attorney may be supported against any person who honestly acts on the faith of its validity, either on the ground that the signature the face of the document operates as a contractual representation of its validity, or on the ground that some blame can under such circumstances be imputed to the insane person for signing it. Both these arguments, however, appear to be answered by the cases of Foster v. MKinnon and Lewis v. Clay, in each of whi a sane person was held to be not bound, either by way of contract or estoppel, by a document which he had been induce to sign by a fraudulent representation as to its nature. If, as we think, the ground of these decisions is the absence of intention to execute such a document as that actually exeented, the principle is equally applicable to the case of a document executed by a lunatic without any intention to execute it. Otherwise, already pointed out, a person of unsound mind would have protection than a sane person.

Regarding the present case from this point of view, it becomes necessary to make a careful examination of the evidence in orde to see under which branch of the law the case falls. It agreed that the evidence taken in this case and that taken in

We of Clwydd Company's Case should be read as applicable to H. ©. or A. both cases. Now, although when a cause has been heard by a a udge on vivd voce evidence, a Court of appeal is naturally MeLaveuuy reluctant to differ from him on a question of fact, yet the Court i must bear in mind that it is required to re-hear the cause, and to 1 m its own conclusions upon the evidence. (See Coghlan v. berland, 1898, 1 Ch., 704). The difficulty which the Court McLavonriw of appeal feels is greater when there is a conflict of evidence, or waked vhen the weight to be attached to uncontradicted testimony (CONTE? ends to some extent upon the demeanor of witnesses, than Co. Lrp. nthe facts are not contradicted, and the main question is as - (No. 2). the proper inference to be drawn from them, or when the case | substantially one of circumstantial evidence. In the present e we regard what may be called the circumstantial evidence as e cogent in its effect than the direct testimony of the mithesses upon the point directly in issue. Upon a careful leration of the evidence we have arrived at the following sions of fact: - In October, 1900, the plaintiff was of ound mind in such a degree that he was incapable of managing affairs in the sense of disposing of his property (see Jenkins v.

'is, 14 Ch. D., 674); this being his general condition, ough he had occasional more lucid intervals, in which he might e been able, to a greater or less extent, to understand what he is doing. It is not disputed, however, that when it is once tablished that a person is of unsound mind the burden of making it that a particular transaction took place during a lucid erval is cast upon the person alleging the fact (Hall v. Warren Ves, 610). And, in our opinion, the defendants have not arged themselves of this burden. We find further that in ber, 1900, those interested in the plaintiff's affairs, particularly Wife and his managing clerk, had considered the probability it his estate would have to be administered by the Supreme ourt in its Lunacy jurisdiction, and that they desired to avoid, ossible, the necessity for a declaration of lunacy and the tment of a committee. It was then suggested - by whom

not appear, and with a motive which in one sense was laud- le enough - that if the plaintiff could be persuaded to sign a er of attorney purporting to give his wife complete control

of attorney - -that now in question - was accordingly prepared

in his own office (he is a solicitor), by which the most full and

ample powers were expressed to be given to his wife. While this was being done, Dr. Lamrock, his medical adviser, y consulted as to whether it would hurt him to "sign a document," to which he replied, " No, if it did not upset him." Dr. Lamroek at first thought it improper that a man in the plaintift's condition should be asked to do such a thing, but was advised by plain

Coat Mistse . : Co. Lr. tiffs managing clerk that it would be legal.

his name." Plaintiff had previo sign his name at all. We infer from this evidence that som

to sign his name, and that he was unwilling to do so. Final, the power of attomey, having been prepared, was taken in closed envelope to plaintift's wife, who on the following day

to his mind. His managing clerk, by whom it was prepared was not allowed to see him, and the agent chosen to induce th signature was his son, a lad of 17, who only knew that the document, which up to that time he had not seen, and whie he never read, was one purporting to give authority to on the plaintiff's business. To our minds this evidence point irresistibly to the conclusion that those by whom the pow of attorney was prepared thought (having perhaps been s advised), that it was immaterial whether the plaintiff did or dil not understand the nature of the document which he was t sign, but that his signature would be equally effectual in ei ease, and that they thereupon waited, not for a lucid interval which he would be capable of understanding what he was doing but for an occasion on which he would be sufficiently tractable t be induced to sign his name to anything put before him. I oceasion was found on 24th October. We see no reason to dou the substantial accuracy of the account given of the events

at day by the witness J. Harley McLaughlin. On the following H.C. oF A. day the plaintiff's medical adviser asked him if he had signed 8% "the paper," to which the plaintiff replied that he had. There is yeLavewu

no evidence to show that he retained any recollection of having bas

ppear - of having appointed his wife to be his agent. MeLaventin To counter-balance the evidence the effect of which we have yarror briefly stated, we find nothing except a suggestion that the .ChMIP? intiff's wife might have asked him when sufficiently sane to Co. Lrp. understand her, to appoint her his agent to dispose of his property. (No. 2). But the suggestion is not supported by evidence, and in our opinion the evidence tends strongly to negative it. We feel our- Ives, therefore, compelled reluctantly to come to the conclusion at when the plaintiff executed the power of attorney on 24th October, 1900, he had no knowledge of what he was doing, except that he knew that he was signing his name, which, under the ircumstances, was, as described by Dr. Lamrock, a mere mechanical act. And we think it necessarily follows from all the circumstances of the case that his wife and his managing clerk aware of the actual facts. The case therefore appears to us fall within the class of eases in which a man signs his name to document without any intention to execute such a document, nd not under the class in which a man executes a document, intending to execute it, but induced to do so by false representa- tions as to a collateral matter.

"It is not alleged that after the plaintiff's restoration to reason conduct was such as to afford any evidence of ratification of e acts of his self-constituted agent, either by acquiescence or therwise. On the other hand, it is admitted that before his recovery the proceeds of the shares were applied for his benefit, tly in the maintenance of himself and his family. It was gested that this fact operated, in some undefined way, as a w to the suit. If, however, it does not operate by way of ppel or acquiescence, it is difficult to see how it can affect the laintiff's rights as against the defendants.

H.C. or A. tiff's name from the share register by his authority, and that he aaa is entitled, as against them, to the specifie relief claimed. McLaveman Would, however, be an eminently unsatisfactory result of thi Dax litigation if he were able to recover the shares themselves, and TeLxcrarn also to retain the benefits which were conferred on him, altho ae without his consent or knowledge, by the application of the pr McLavennay ceeds of the shares. His counsel have expressly offered to give Vane or the defendants the benefit of these proceeds. And, on considera- Penns tion, we think that the Court may, notwithstanding the limite Co. Lrv. relief that can be given in this suit, owing to the absence of (No. 2). parties, make such a decree as will do, so far as it can now b done, complete justice. If any obstacle exists, it is, in our opinion, one of form and not of substance, and is, we think, removed by plaintift's offer, as we will proceed to show. It seems clear thal the defendants, being called upon to restore the plaintiff's name to the register, would be entitled to indemnity from the plaintit agent for any loss which they may sustain by reason of implied warranty of the validity of the power of atton (Starkey v. Bank of England, 1903 A.C., 114); and the amount of the indemnity would not, upon the facts now before us, be les than the amount realised by the sale of the shares. On the o' hand, it seems that, under the circumstances of this case, the agent, who acted throughout honestly, but under bad advier would be entitled, on the doctrine as to which the German Mining Co.'s Case (4 DeG., M. & G., 14), is the leading anthority, te stand in the place of the persons to whom the proceeds of the shares were paid, and who were either creditors in respect of ng debts contracted during the plaintiff's sanity, or creditor for debts contracted in respect of necessaries for which he liable under his implied authority. If they, or she in their sued him in respect of these debts, he could not, without ratifyin her action, plead payment. Sh

, therefore, suing in their nam would be entitled to recover from him the full amount so expended de., as we are told, the full amount of the proceeds of the sale. the shares, being the whole or part of the sum that she would b liable to pay to the defendants. The liability is, then, in substan a liability of the plaintiff, and although it is not a direct lial to the defendants, it is one of which they could indirectly, and b

circuitous course, obtain the benefit. The plaintiff's offer, we think, H- ©. or A. enables the Court to dispense with this cireuity of action (whether 1%

'it could do so without that offer or not), and so to do complete MeLavenuax

• justice between the parties, so far as is now possible.

_ For these reasons, we think that the decree appealed from must be reversed, and instead thereof there must be a declaration that Co. Lr. the transfers of the shares in question by Ada Amanda McLaughlin, MeLaventw assuming to act as plaintiff's agent under the power of attorney, _ were invalid, and a direction that the defendants rectify their PPro register by inserting the name of the plaintiff as the holder of Co. Lap. 8 original shares and 39 new shares, and pay the plaintiff a sum - (No. 2). equal to all the dividends which have been declared on the 157 shares since the removal of the plaintiff's name, together with a 'sum equal to the proceeds of any fractional part of a new share to which he was entitled, and which was sold by defendants. The defendants must pay the plaintiff's costs up to and inclusive of the hearing. The plaintiff's submission to indemnify the defend- ants, to the extent of all moneys received by his pretended attorney as the proceeds of the shares in question, against any loss which they may sustain, or any liability which they may ineur to other persons by reason of obedience to the decree, must 'be embodied in the decree. The cause will be remitted to the "Supreme Court for the execution of this judgment. The respondents must pay the costs of the appeal.

Judgment was then delivered in MeLaventin v. THE VALE or Ciwypn Coat Minine Co. Lrp.

Grirrits, C.J. The material facts in this case are not dis- tinguishable from those in the former case. For the reasons given in that case we think that the decree appealed from must be eversed, and instead thereof there must be a declaration that the transfers of the shares in question by Ada Amanda McLaughlin, ming to act as the plaintiff's agent under the power of torney, were invalid, and a further declaration that the plain- f is entitled to have the share register rectified by inserting $name as the holder of the shares, with a direction that the

defendants rectify the register aceordingly, and pay to the plain- tiff a sum equal to all the dividends which have been declared on the shares since the removal of the plaintiff's name. The defen- dants must pay the plaintiff's costs up to and inclusive of the hearing. A submission by the plaintiff to indemnify the defend- ants, to the extent of all moneys received by his pretended agent as the proceeds of the shares in question, against any loss - which they may sustain, or any liability which they may incur to other persons by reason of obedience to the decree, must be embodied in the decree. , The cause will be remitted to the Supreme Court for the execution of this judgment. The respondents must pay the costs of the appeal. d

Lingen for the respondents, Daily Telegraph Newspaper Co. - Ltd., then applied for a stay of proceedings pending appeal to the : Privy Council. The Court has inherent power to stay proceedings.

[Grirriru, C.J - Is there any case in which a stay of execution has been granted where there is no appeal as of right ? } .

Hodgkinson vy. Travers, 1 B. & C., 257, and Howarth y. Walker (1903), 3 S.R. (N.S.W.), 235, are cases where this has been - done. z

(Grirrir, C.J. - In the last mentioned case the Privy Council had granted leave to appeal.]

This is a question of great importance, and is a case of novelty. The Court below came to a different conclusion.

[Grirriru, C.J. - It may be that the Privy Council will say it is only a question of fact. This isa Court of final resort. The Constitution says that its judgment shall be final and conclusive - in such appeals as this.] :

(Barron, J., referred to the judgment of Stephen, A.CJ., in Howarth v. Walker (supra). ;

We are willing to submit to any terms the Court may impose. -

Sheppard for respondents, the Vale of Clwydd Coal Mining Co, followed. This is not a final appeal, because we have the righ to apply to the Privy Council for special leave. That right is a limitation upon the statement in the Constitution that this shall be a Court of final appeal.

_ GrirritH, C.J. There is no doubt that the Court has power H. C. or A. to stay execution of its judgments, but in this case the Constitu- Pai tion has provided that the Court's decision shall be final and yorsvenny conclusive. It is true that the Judicial Committee may give )" leave to appeal from our judgment. Under the system of appeals ee from State Courts to the Privy Council the appeal lay as of right, but it is absolutely unheard of to stay proceedings upon the McLavemux judgment of a Court from which there is no appeal as of right. ¥,7%. op

Tostay execution because the Court doubted whether it had given , Chwrp Coat Misixe

a proper judgment would be unworthy of a Court of appeal. Co. Lrv. The applications must be refused. (No. 2).

Solicitors, for Daily Telegraph Newspaper Co., Ltd., Lawrence & Lawrence.

_ Solicitor, for Vale of Clwydd Coal Mining Co., Ltd., Mark Mitchell.

[HIGH COURT OF AUSTRALIA.} ELOHERY . ; i F a F APPELLANT;

ON APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES.

ription - Ancient lights - Enjoyment for twenty years and upwards - Presump- H.C. or A. tion of lost grant - Rebutting evidence - Laws of England introduced into New 1904. South Wales by first colonists - Laws and Statutes of England capable of being = - - applied in New South Wales - 9 Geo. IV, ¢. 83, sec. 24. Sypvry, At the time of the passing of the Act 9 Geo. IV., ¢. 83, the English law of Ma7eh 30, 31. passing of the Act 9 Geo. IV., ¢. 83, e : ctiption as to ancient lights was a law which could be applied in New South 2/30. ales within the meaning of sec. 24 of that Statute, and, therefore, became part of Gritith, J, law of that colony by virtue of that section, even if it had not been brought given yy, them to the colony by the first settlers.