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350
[ENGLISH LAW
BANKS AND BANKING

where he has either no account or is overdrawn, but the bank has, as against the customer, the right to combine accounts at different branches and treat them as one account (Garnet v. McEwen, L.R. 8 Ex. 10). Funds are not available so long as a garnishee order, founded on a judgment against the customer, is pending, since it attaches all moneys on current account irrespective of the amount of the judgment (Rogers v. Whiteley).

The very questionable practice of post-dating cheques has been the source of considerable doubt and inconvenience to bankers. The use of such documents enables the drawer to obtain the results of a bill at a fixed future date without the expense of a regular bill-stamp. But the Bills of Exchange Act 1882, sec. 13, subs. 1, provides that "a bill is not invalid by reason only that it is ante-dated or post-dated, or that it bears date on a Sunday." The banker cannot therefore refuse to pay a cheque presented after the apparent date of its issue on the ground that he knows it to have been post-dated. On the other hand, he is entitled and indeed bound to refuse payment if such a cheque is presented before the apparent date of its issue (Morley v. Culverwell, 7 M. & W. at p. 178). Revocation of authority to pay a cheque must come to the banker's conscious knowledge and be unequivocal both in terms and method of communication. He is not bound to act on an unconfirmed telegram (Curtice v. London City & Midland Bank [1908], 1 K.B. 293). The banker's authority to pay cheques is terminated by the death, insanity or bankruptcy of the customer, or by notice of an available act of bankruptcy committed by him.

The banker is bound to observe secrecy with respect to the customer's account, unless good cause exists for disclosure, and the obligation does not cease if the account becomes overdrawn (Hardy v. Veasey, L.R. 3 Ex. 107). In England a cheque is not an assignment of funds in the banker's hands (Bills of Exchange Act 1882, sec. 53). The holder of the cheque has therefore no claim on the banker in the event of payment being refused, his remedy being against the drawer and endorser, if any. On this section is also based the custom of English bankers not to pay part of the amount of a cheque where there are funds, though not sufficient to meet the whole amount. The section does not apply to Scotland, where it would seem that the bank is bound to pay over what funds it has towards satisfaction of the cheque. A banker is entitled to hold paid cheques as vouchers until there has been a settlement of account between him and the customer. The entries in a pass-book constitute prima facie evidence against the banker, and when returned by the customer without comment, against him; but the proposition that such return constitutes a settlement of account has been much disputed. Indeed where forgery is the ground of repudiation of a cheque, no dealings or omissions of the customer with regard to the pass-book would seem to preclude him from objecting to being debited and throwing the loss on the banker (Kepitigalla Rubber Co. v. National Bank of India, 25 Times L.R. 402). As against the banker, however, credit entries in the pass-book cannot be disputed if the customer has altered his position in reliance thereon, and cheques drawn against an apparent balance must be honoured (Holland v. Manchester & Liverpool District Bank, 25 Times L.R. 386).

The rule by which the holder of a cheque has no direct recourse against the banker who dishonours it, holds good even where the banker has before issue marked the cheque as good for the amount, such marking not amounting to an acceptance by the banker. As between banker and banker, however, such marking or certifying probably amounts to a binding representation that the cheque will be paid, and, if done by request of the drawer, the latter cannot subsequently revoke the authority to pay. In certain circumstances, marking at the instance of the person presenting the cheque for payment may amount to an undertaking by the banker to hold the money for his benefit (In re Beaumont [1902], 1 Ch. p. 895).

A banker either paying or collecting money on a cheque to which the person tendering it for payment or collection has no title or a defective title is prima facie liable to the true owner for conversion or money had and received, notwithstanding he acted in perfect good faith and derived no benefit from the operation. Payment of an open cheque, payable to bearer either originally or by endorsement, is, however, in all cases a good payment and discharge (Charles v. Blackwell, 2 C.P.D. at p. 158). Limited protection in other cases has been extended by legislation to the banker with regard to both payment and collection of cheques, usually on the principle of counterbalancing some particular risk imposed on him by enactments primarily designed to safeguard the public.

By sec. 19 of the Stamp Act 1853, the banker paying a draft or order payable to order on demand, drawn upon him, was relieved from liability in the event of the endorsement having been forged or unauthorized. This enactment was not repealed by the Bills of Exchange Act 1882, and, in London City & Midland Bank v. Gordon (1903), A.C. 240, was held to cover the case of drafts drawn by a branch of a bank on its head office. Sec. 60 of the Bills of Exchange Act 1882 extends like protection to the banker in the case of cheques, the definition of which therein as "bills drawn on a banker payable on demand" debars drafts of the above-mentioned description. Such definition, involving the unconditional character of the instrument, also precludes from the protection of this section the documents now frequently issued by corporations and others, which direct bankers to make payments on a specific attached receipt being duly signed (London City & Midland Bank v. Gordon). Sec. 17 of the Revenue Act 1883, however, applies to these documents the crossed cheques sections of the Bills of Exchange Act 1882 (see Bavius, Jr., & Sims v. London & South-Western Bank [1900], 1 Q.B. 270), while denying them the position of negotiable instruments, and a banker paying one of them crossed, in accordance with the crossing and in the absence of any indication of its having been transferred, could probably claim immunity under sec. 80. The Bills of Exchange Act 1882 contains no direct prohibition against a banker paying a crossed cheque otherwise than in accordance with the crossing, but if he do so he is liable to the true owner for any loss suffered by him in consequence of such payment (sec. 79), and is probably unable to charge his customer with the amount. A banker paying a crossed cheque in accordance with its ostensible tenor obtains protection under sec. 80 and the proviso to sec. 79. Questions have arisen as to the bearing of the crossed cheques sections when a crossed cheque drawn on one branch of a bank is paid in for collection by a customer at another branch; but the transaction is so obviously a legitimate and necessary one that either by the collecting branch may be regarded as a separate bank for this purpose, or sec. 79 may be ignored as inapplicable (Gordon v. London City & Midland Bank [1902], 1 K.B. 242 C.A.).

The collection of crossed cheques for a customer being virtually incumbent on a banker, qualified immunity is accorded him in so doing by sec. 82, a final exposition of which was given by the House of Lords in London City & Midland Bank v. Gordon (1903), A.C. 240. To come within its provisions, the banker must fulfil the following conditions. He must receive the cheque from, and the money for, a customer, i.e. a person with whom he has definite and existing business relations (see Great Western Ry. Co. v. London & County Bank [1901], A.C. 414). He must take the cheque already crossed generally or specially to himself. His own crossing under sec. 77 is absolutely inefficacious in this connexion. He must take the cheque and receive the money in good faith and without negligence. Negligence in this relation is the omission to exercise due care in the interest of the true owner, not necessarily the customer. To avoid this disqualification of negligence, the banker must see that the endorsements, where necessary, are ostensibly correct; he must satisfy himself of the authority where an endorsement is per procuration; he must not take for private account a cheque which on its face indicates that the holder is in possession of it as agent, or in an official capacity, or for partnership purposes (Hannan's Lake View Central Ld. v. Armstrong & Co., 16 Times L.R. 236; Bevan v. National Bank, 23 Times L.R. 65); he must not take a cheque marked "account payee" for an account other than that