Royal Bank Appraisals; Personal Liability on Company Cheques #61

By Gerry Neely
B.A. LL.B.

From time to time suggestions are made for topics for Legally Speaking columns and, if they are of general interest and haven't been covered before, we will try to use them. One suggestion comes from the Vancouver Island Real Estate Board and it concerns a memorandum sent to all Royal Bank fee appraisers. Instead of providing an appraisal report with comparable reproduction estimates in support of market value, the appraiser for the Royal Bank need only complete on his letterhead an opinion as to market value which is based upon an external inspection of the property. On the basis of the appraiser's knowledge of sales in the neighbourhood and if the property is located in a built-up area of "similar type" residential properties where prices and market are stable, the appraiser need only state that he considers the present market value is reasonable for a mortgage of 75% or less of the present market value. For this, plus a photograph of the property, the appraiser receives $50.00. Those licencees who are members of the Appraisal Institute of Canada will be familiar with this request and the concerns expressed by that Institution as to the potential liability in negligence of an appraiser. As to this question of negligence or of a breach of the Hedley Byrne liability, one can generalize by saying that where the client limits the criteria upon which the licencee is expected to provide an opinion, then the facts which establish negligence or a breach of duty are also limited. However, the fact remains that opinions of these kinds can't be treated casually since the standard of care is established and a breach of that may create damages.

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A case reported in the Business Law Reports attracted the interest of a licencee experienced in business.¹ The facts were simple. The president of a company signed a cheque upon which the corporate name of the company was imprinted. The president did not indicate on the cheque that he was an officer of the company or that he was signing it on behalf of the company. When the cheque was presented for payment and it was dishonored, the payee sued both the company and the president. The president defended on the basis that he had only signed the cheque in a representative capacity as an officer of the company and not in his personal capacity. To his surprise, he lost. The reason is because of a general rule that any person who signs a cheque is personally liable unless that person states on the face of the cheque that he signs on behalf of another. There are circumstances in which this general rule may be avoided. If, for example, there is ambiguity on the face of the cheque, evidence may be introduced as to the intention of the party who signed it. However, the Court held that where the cheque was signed by one person, together with the name of the corporation, there was no ambiguity and the general rule applied.

The safest course for anyone signing on behalf of a company or a society or on behalf of any other person is to add the word "per" before the signature line, as well as the name of the office of the person signing the cheque. When you are having your corporate cheques printed, the word "per" should be added as a matter of course.

Have you ever noticed whether the printed cheques issued by your bank to your company have the word "per" on them?

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