indoor management
3. Forgery
Forgery may in circumstances exclude the Turquand rule. The only clear illustration is Ruben v Great Fingall Consolidated.9*
The plaintiff was the transferee of a share certificate issued under the seal of the defendant company. The certificate was issued by the company’s secretary, who had affixed the seal of the company and forged the signatures of two directors.
The plaintiff contended that whether the signatures were genuine or forged was a part of the internal management and, therefore, the company should be estopped from denying genuineness of the document. But it was held that the rule has never been extended to cover such a complete forgery. Lord LOREBURN said: “It is quite true that persons dealing with limited liability companies are not bound to inquire into their indoor management and will not be affected by irregularities of which they have no notice. But this doctrine, which is well established, applies to irregularities which otherwise might affect a genuine transaction. It cannot apply to a forgery.”97
This statement has been regarded as a dictum, as the case was decided on the principle that the secretary did not have actual or implied authority to represent that a forged document was genuine and, therefore, there was no estoppel against the company. Hence, a general statement that “the Turquand rule” does not apply to forgeries is not exactly warranted by the present authorities. Thus, for example, Andrews R. Thompson,98 writing in an extensive article on the subject, says: “A company may represent that a forged instrument is genuine. In such a case, it will be estopped from denying that a forged instrument is genuine as against an outsider who has relied to his detriment upon the representation. Also, a company may represent that the forger has authority to execute the forged instrument. In that event it will be bound by the forged instrument as against an outsider who has relied on the apparent authority to execute the
Forgery may in circumstances exclude the Turquand rule. The only clear illustration is Ruben v Great Fingall Consolidated.9*
The plaintiff was the transferee of a share certificate issued under the seal of the defendant company. The certificate was issued by the company’s secretary, who had affixed the seal of the company and forged the signatures of two directors.
The plaintiff contended that whether the signatures were genuine or forged was a part of the internal management and, therefore, the company should be estopped from denying genuineness of the document. But it was held that the rule has never been extended to cover such a complete forgery. Lord LOREBURN said: “It is quite true that persons dealing with limited liability companies are not bound to inquire into their indoor management and will not be affected by irregularities of which they have no notice. But this doctrine, which is well established, applies to irregularities which otherwise might affect a genuine transaction. It cannot apply to a forgery.”97
This statement has been regarded as a dictum, as the case was decided on the principle that the secretary did not have actual or implied authority to represent that a forged document was genuine and, therefore, there was no estoppel against the company. Hence, a general statement that “the Turquand rule” does not apply to forgeries is not exactly warranted by the present authorities. Thus, for example, Andrews R. Thompson,98 writing in an extensive article on the subject, says: “A company may represent that a forged instrument is genuine. In such a case, it will be estopped from denying that a forged instrument is genuine as against an outsider who has relied to his detriment upon the representation. Also, a company may represent that the forger has authority to execute the forged instrument. In that event it will be bound by the forged instrument as against an outsider who has relied on the apparent authority to execute the