Cash Resources Australia Proprietary Limited v Chase AMP Bank Limited No. SCGRG 91/0601 Judgment No. 3998 Number of Pages 5 Banking and Financial Institutions

[1993] SASC 3998

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA PRIOR J

CWDS
Banking and financial institutions - cheques - presentment - payment refused - delay in advice - statutory claim by payee against drawee bank - Cheque transaction - plaintiff in business of factoring debts - factoring agreement existed between plaintiff and another company - defendant claimed to be unaware of plaintiff's business arrangements with that company - company drew a cheque on defendant in favour of plaintiff - agreement between banks as to requirement to dishonour cheque on day of receipt of cheque or of relevant report - dishonour of cheque held off, then further delayed - plaintiff informed of dishonour by receipt of advice addressed to other company.
Held: - dishonour effected by communication to holder - this done as soon as reasonably practicable, even if communication to bank presenting chegue on holder's behalf was not - action dismissed.
Cheques and Payment Orders Act 1986ss67, 69. Parrs Bank v Thomas Ashby and Co (1898) 14 TLR 563; Riedell v Commercial Bank of Australia Ltd (1931) VLR
382 and National Slag v Canadian Imperial Bank of Commerce (1985) 19 DLR (4th) 383; 140 DLR (3d) 473, distinguished.

HRNG ADELAIDE, 3-15 June 1993 #DATE 21:6:1993
Counsel for appellant:     Mr David Howard
Solicitors for appellant:    Esau Meister and Associates
Counsel for respondent:     Mr Neil Strawbridge
Solicitors for respondent: Baker O'Loughlin

ORDER
Action dismissed.

JUDGE1 PRIOR J The plaintiff is a company which provides finance to clients by factoring their debts. On 9 September 1989 it entered into a debt factoring agreement with Petrastone Pty Ltd. Certain of Petrastone's debts were assigned to the plaintiff and payable to it at its own bank. If any moneys were received by Petrastone on payment of a factored debt by a debtor, they were held on trust by Petrastone for the plaintiff. 2. Petrastone held a business cheque account with the defendant bank. This account was opened on 29 November 1989. A joint account in the name of the plaintiff and Petrastone was also opened at the same time. On 28 November a telephone conversation took place between the plaintiff's Adelaide Manager, Mr Ciccolella, and the State Manager of the defendant, Mr Griffin. Evidence from both men establishes that Ciccolella informed Griffin that the plaintiff and Petrastone had entered into a debt factoring agreement and that the plaintiff wished to deal with the defendant bank for financial transactions relating to Petrastone. 3. Much of what else was said between Mr Ciccolella and Mr Griffin is disputed. The plaintiff claimed that Mr Griffin was told the nature of the factoring agreement with Petrastone, that to facilitate payment of the plaintiff's advance to Petrastone the plaintiff would require a bank deposit book for Petrastone's account, and that Petrastone would collect its own debts including the factored debts. Ciccolella's evidence was that Griffin was told that Petrastone held payment of the factored debts on trust for the plaintiff, that any cheques in payment of a factored debt were not payable into the Petrastone account with the defendant but were to be paid by Petrastone directly to the plaintiff's bankers, and that if Petrastone received a cheque that was partly for a factored debt and partly for a non-factored debt, it was obliged to pay that cheque into the plaintiff's bank account and the plaintiff would refund the unfactored component. 4. Ciccolella's evidence was that Griffin was also told that because of the factoring agreement, most banking into Petrastone's account with the defendant would be performed by the plaintiff and that Ciccolella would send to Griffin copies of the plaintiff's brochure and a copy of the plaintiff's Outline of Factoring Facility. Ciccolella said that he gave similar information to another representative of the defendant, Ms Emerald Filis. Ms Filis gave evidence. Like Mr Griffin, she too disputed that she was given details about the plaintiff's business and particular arrangements with Petrastone. 5. In the course of the trial the plaintiff's counsel indicated that a number of claims in conversion or based on alleged breaches of fiduciary or other duties would not be pursued. A single claim remained with respect to a particular transaction. 6. On Friday, 1 December 1989, Petrastone drew a cheque for $91,950.70 on the defendant in favour of the plaintiff. The plaintiff's bankers, ANZ Banking Group Ltd, credited that amount to the credit of its account that very day. Petrastone's account with the defendant was debited too, putting the new account into a $76,494.31 deficit. The amount on the cheque was a sum due to the plaintiff from Petrastone with respect to a factored debt. 7. Griffin's evidence was that on Monday, 4 December, the cheque appeared on his desk with a computer generated report that that cheque took the account overdrawn to the amount already mentioned. Because of this, Griffin instructed his Operations Manager to dishonour the cheque, holding off the dishonour during the day whilst he tried to contact a director of Petrastone, who had told him of a big cheque coming in. These attempts failing and no deposit to credit the account occurring, Griffin issued the instruction to dishonour. However, when he came in to the bank on the following morning he saw that the dishonour had not occurred. The Operations Manager explained that he had not been able to get through to the Sydney office of the bank. It was a policy of the defendant bank that the Sydney office had to be advised before a cheque was dishonoured. Griffin said he then gave instructions to return the cheque to the plaintiff's bank by hand delivery. Petrastone's account was credited with the amount the subject of the cheque. The Operations Manager did not give evidence. Documentary evidence and evidence from both Griffin and Ms Filis establishes that certain procedures were carried into effect consistent with the dishonour taking place that day on 5 December 1989. An advice of debit was issued and sent to Petrastone at the plaintiff's address. Mr Ciccolella acknowledged that he saw the advice dated 5 December on his desk the next day, Petrastone's address for notices from the bank being the plaintiff's. The plaintiff's bank issued an advice to its customer on 7 December, that the cheque had been marked "present again". The cheque was presented again. On 7 December, Petrastone's account was debited afresh but reversedthe following day, Friday,8 December. 8. Griffin's evidence was that the purpose of his instruction to return the cheque to the ANZ by hand delivery was to ensure that that bank would receive the cheque with the "present again" endorsement "at the equivalent time in the morning" that that bank would have received it had his instruction to dishonour been dealt with in the ordinary way on 4 December. The evidence is that under normal circumstances a dishonoured cheque goes to a clearing house for distribution to other banks. The plaintiff called Mr Colgate, the Manager, Data and Computer Entry, with the ANZ Banking Group Ltd. He gave evidence of practices and experience of the agreement between banks with respect to clearing house arrangements. The agreement itself is in evidence. In December 1989 the time limit for return of dishonoured items agreed was the close of business on the day of physical receipt of a cheque or the day of receipt of relevant reports showing the state of the account at the drawees bank, whichever was the later. 9. Consistent with the exchange practices, the cheque in this case was processed through the clearing house on Friday afternoon, 1 December and delivered to the defendant bank late that day. The agreement between banks contemplated that any dishonour should occur on Monday, 4 December, the same business day as the receipt of a report as to the state of the drawer's account. Mr Colgate acknowledged that the defendant bank had two options with respect to any decision to dishonour the cheque. "They could post it through the mail, or they could hand deliver it to the bank." Mr Colgate's evidence and the stamps on the back of Petrastone's cheque indicate that the plaintiff's bank did not note the defendant's advice to "present again" until 7 December 1989. By that time, of course, the plaintiff had been informed of the dishonour by receipt of the advice addressed to Petrastone at the plaintiff's office. The documentary evidence from the plaintiff's bank and the evidence of Colgate leaves me in doubt as to when the plaintiff's bank was actually advised of the first dishonour. It is most probable that the bank did not receive the cheque on 5 December, but on 7 December. The absence of evidence from the defendant's Operations Manager to disprove that is less important given what happened to the advice addressed to Petrastone at the plaintiff's address. 10. In cross-examination, Mr Colgate admitted that when a cheque is returned marked "present again" there is normally a voucher accompanying the cheque when it is sent back and that under the agreement between banks, an item dishonoured out of time may be rejected by the collecting bank. This did not happen in this case, the cheque being presented again on 7 December. Mr Colgate's evidence was that when a voucher accompanies a returned cheque marked "present again", the collecting bank would eventually use the voucher as a credit voucher to a suspense account in the branch, with no debit to the customer's account occurring at that time. It is "only ... debited to an internal suspense account within the bank.", 11. because there is an expectation that the cheque would normally be represented. In this case, the evidence establishes that there was no debit to the plaintiff's account with ANZ until 11 December 1989, after the cheque was presented again and dishonoured. 12. The plaintiff invokes s.67 of the Cheques and Payment Orders Act 1986 (Cwth). That section provides:-
    "(1) Where a cheque is duly presented for payment, the drawee
    bank shall either pay or dishonour the cheque as soon as is
    reasonably practicable and, if the drawee bank fails to do so,
    then, unless it has become aware of a defect in the holder's
    title or that the holder has no title to the cheque, the drawee
    bank:
    (a) may not dishonour the cheque; and
    (b) is liable to pay the cheque to the holder.
    (2) In determining, for the purposes of subsection (1), whether
    the drawee bank failed to pay or dishonour the cheque as soon as
    was reasonably practicable, regard shall be had to:
    (a) the fact that the instrument is a cheque and that it is
    reasonable to expect a cheque that has been duly presented for
    payment to be either paid or dishonoured promptly;
    (b) the means by which, and the place at which, the cheque was
    presented;
    (c) the means that were available to it for paying or
    dishonouring the cheque;
    (d) the relative speed, reliability and cost of those means;
    (e) the usage of banks in relation to the payment and dishonour
    of cheques;
    (f) (immaterial)
    (g) any other facts of the particular case, including:
    (i) the nature of the cheque; and
    (ii) whether any delay in paying or dishonouring the cheque was:
    (A) caused by circumstances beyond the control of the drawee
    bank; and
    (B) not imputable to default, misconduct or negligence on the
    part of the drawee bank." 13. Section 69 of the Act defines dishonour. It provides:- "A cheque is dishonoured if the cheque is duly presented for payment and payment is refused by the 7 drawee bank, being a refusal that is communicated by the drawee bank to the holder or the person who presented the cheque on the holder's behalf." 14. The evidence in this case leads me to conclude that a dishonour occurred in this case by the communication by the defendant to the holder on 6 December 1989, not by any communication to ANZ Bank on that day or the day before or after that day. Had the plaintiff not received notice by the advice sent to its office, the defendant's liability under para (c) of s67(1) could have been made out. Having regard to the matters identified in s-s(2) of s67, the dishonour was communicated to the holder as soon as was reasonably practicable even if that to the bank presenting the cheque on the holder's behalf was not. 15. Counsel for the defendant cited three authorities:- Parrs Bank v Thomas Ashby and Co (1898) 14 TLR 563; Riedell v Commercial Bank of Australia Ltd
(1931) VLR 382; and National Slag v Canadian Imperial Bank of Commerce (1985) 19 DLR (4th) 383 and 140 DLR (3d) 473. 16. None of these cases involved a claim based upon a statutory right. All involved a consideration of clearing house rules and the consequences of the delayed return of a dishonoured cheque. The first case involved a claim by a collecting bank for its loss, not the payee's loss. The claim against the drawee bank succeeded. The second case was a payee's claim against the collecting bank. This succeeded because the collecting bank credited the bank upon which the cheque was drawn notwithstanding a provision in the clearing house rules that any stale return might be rejected. Mann J observed at 384, that the payee was entitled to the benefit of any 8 advantages arising from the use of the machinery of the clearing house rules as between himself and his agent. In this case, the clearing house rules become relevant by reference to ss2 of s67. The payee bank may gain an advantage from the arrangements notified to it that had the notice of dishonour going to both the payee and the drawer at the same time in consequence of the plaintiff's ongoing interest in the drawer's financial activities. The third case did include a claim by a payee against the drawee bank as well as one against the collecting bank. As to the claim against the drawee bank, that was dismissed upon the basis that the drawee bank was not in breach of any duty it owed to the payee, the trial judge and the Court of Appeal both observing that, "In addition, of course, the one day's delay caused the appellant no damage and that delay did not turn a worthless cheque, by some legal legerdemain, into a good one." (19 DLR at 383) 17. The trial judge dealt with this in his judgment at 476 and 477 of 140 DLR(3d). However, I do not read those observations as necessarily having direct application to the right and remedy conferred by s67. It is true that in this case the plaintiff's bank took no action by way of rejection, even on 7 December. By that time the plaintiff had notice of the dishonour in any event. The argument as to no damage by the time that the plaintiff had notice of the dishonour may be of no avail in other cases. It is irrelevant to the basis upon which I have to dismiss the action. 18. The action is dismissed.