Commissioners of the State Savings Bank of Victoria v Permewan, Wright and Company Limited

The Commissioners of the State Savings Bank of Victoria (the Commissioners) appealed from a decision of the Supreme Court of Victoria concerning their liability for the conversion of certain cheques. The plaintiffs, Permewan, Wright & Company Limited, alleged that the Commissioners, acting as bankers, had negligently collected cheques that had been fraudulently converted by a clerk of the plaintiffs. The core dispute revolved around whether the Commissioners qualified as "bankers" under the relevant legislation and, if so, whether they had acted without negligence in collecting the cheques.

The High Court was required to determine two primary legal issues. First, whether the Commissioners, given their statutory functions and the nature of their operations, constituted "bankers" within the meaning of section 88 of the *Bills of Exchange Act 1909* (Cth) and section 83 of the *Instruments Act 1890* (Vic). Second, if they were considered bankers, whether they had received payment of the cheques without negligence, thereby entitling them to statutory protection against claims for conversion. This involved an examination of the definition of "banking business" and the standard of care expected of a banker when collecting crossed cheques.

A majority of the High Court (Gavan Duffy, Powers, and Rich JJ.) held that the Commissioners did carry on the business of banking, as their essential functions involved the collection of money by receiving deposits and utilising those funds. They were therefore considered bankers for the purposes of the relevant Acts. However, the court was divided on the issue of negligence. The majority found that the Commissioners had not acted without negligence in collecting thirty-six of the cheques, due to the circumstances surrounding their presentation and the information available on the cheques themselves, which ought to have prompted further inquiry. Conversely, as to the remaining twenty-two cheques, the majority found that the Commissioners had not been negligent and were entitled to protection. Griffith C.J. dissented on the first issue, finding the Commissioners were not bankers, and Isaacs J. dissented on the second issue, finding the Commissioners had not been negligent in relation to any of the cheques.

The appeal was therefore varied. The Commissioners were found liable for conversion in relation to the thirty-six cheques for which negligence was established. However, they were absolved of liability for the twenty-two cheques where the majority found no negligence.