Foods Bis Ltd v Riley & National Australia Bank Ltd

Case [2007] QDC 201

DISTRICT COURT OF QUEENSLAND

CITATION:

Foods Bis Ltd & Ors v. Riley and NAB [2007] QDC 201

PARTIES:

Foods Bis Ltd trading as Tasty Temptations

ACN 098 051720

(First Plaintiff)

and

Ashok Gorasia and Rashmi Gorasia

(Second Plaintiffs)

v

Steven Riley

(First Defendant)

and

National Australia Bank Limited

ACN 004 044 937

FILE NO/S:

BD 2863 of 2005

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

District Court

DELIVERED ON:

 29 August 2007

DELIVERED AT:

Brisbane

HEARING DATE:

7 - 9 August 2007

JUDGE:

Forde DCJ

ORDER:

1.   Plaintiffs’ action is dismissed.

2.   Liberty to apply re costs.

CATCHWORDS:

CHEQUE – VOID OR VOIDABLE TITLE –action for conversion by drawer against collecting bank – defence of good faith and without negligence – evidentiary onus on bank – holder in due course – holder for value – lien on overdrawn account - restitution

Cheques Act 1986 (Cth) ss 3(2),21, 22, 23, 32(2), 38, 40, 49, 50, 51(1), 51 (2), 52, 95 & 98

Cheques Act (Amendment) 1998

Australia and New Zealand Banking Group Limited v Westpac Banking Corporation (1988) 164 CLR 662 - Applied

Baker v Barclay’s Bank [1955] 1 WLR 822 - Distinguished

Bank of Montreal v Tourangeau (1981) 118 DLR (3d) 278 - Distinguished

Bute (Marquess) v Barclays Bank Ltd [1954] 3 All ER 365 - Applied

Capital and Countries Bank v Gordon [1903] AC 240 - Distinguished

Citibank Limited v Papandony [2002] NSWCA 375 - Considered

Commercial Bank of Australia Ltd v Flannagan (1932) 47 CLR 461 – Considered

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 - Applied

Dungarin Trust Ltd v Import Refrigeration Co Ltd (1971) (4) WLD (South Africa) 300 - Distinguished

GIO Finance Ltd v Finchill Pty Ltd [2001] NSWCA 466 - Considered

House Property Company of London v The London and Westminster Bank Ltd (1915) 31 TLR 479 - Considered

Hunter BNZ Finance Ltd v C G Maloney Pty Ltd and Ors (1988) 18 NSWLR 420 – Applied

Importer Co Ltd v Westminster Bank Ltd (1927) 2 All ER 683 - Considered

Jones v Dunkel (1959) 101 CLR 298 - Considered

Jones v Gordon (1877) 2 App Cas 616 - Applied

Jones (RE) Ltd v Waring & Gillow [1926] AC 670 - Considered

London Bank of Australia v Kendall (1920) 28 CLR 401 - Applied

Radford v Ferguson (1947) 50 WALR 14 - Considered

Marfani Co Ltd v Midland Bank Ltd [1968] 1 WLR 956 - Applied

Midland Bank v Reckitt (1933) AC 1 - Distinguished

Miller Associates (Australia) Pty Ltd  v Bennington Pty Ltd and Anor. [1975] 2 NSWLR 506 - Considered

Morison v London County and Westminster Bank Ltd [1914] 3 KB 356 at 373-4 - Applied

National Australia Bank Ltd v KDS Construction Services Pty Ltd [1987] 163 CLR 668 - Applied

National Commercial Banking Co of Australia Ltd v Robert Bushby Ltd (1984) 1 NSWLR 559 – Considered

National Bank Ltd v Silke [1891] 1 QB 435 - Considered

NIML Ltd v MAN Financial Australia Ltd

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Details
AGLC
Foods Bis Ltd v Riley & National Australia Bank Ltd [2007] QDC 201
Case
[2007] QDC 201
Decision Date

CaseChat Overview and Summary

Foods Bis Ltd commenced an action against Riley and National Australia Bank Ltd in the Federal Court of Australia, asserting a claim for conversion arising from the dishonoured cheques drawn by Riley on his overdrawn account. The cheques were collected by the bank, leading Foods Bis Ltd to argue that the bank had no right to retain the funds, as the cheques were void ab initio due to Riley's lack of funds. The bank defended on the basis of good faith and absence of negligence, asserting that it acted as a holder in due course and for value, thereby acquiring a valid title to the cheques.

The primary legal issues before the court involved whether the bank, as a collecting bank, could claim a good faith defence in the face of void or voidable title, and whether it bore the evidentiary onus to prove its good faith and absence of negligence. Additionally, the court had to consider whether the bank had a lien on the overdrawn account and whether restitution was appropriate in the circumstances. The court also examined the applicability of equitable principles, particularly the doctrine of holder in due course, to the facts of the case.

The Federal Court held that the bank had established its defence of good faith and absence of negligence, as it acted without knowledge of the voidness of the cheques and had a lien on Riley's overdrawn account. The court found that the bank, as a holder in due course for value, had a valid title to the cheques, and thus, the action for conversion was dismissed. The court concluded that the bank had discharged the evidentiary onus placed upon it and that restitution was not warranted in these circumstances.

The court dismissed the plaintiffs' action and granted liberty to apply regarding costs. The decision underscores the importance of the collecting bank's due diligence and the application of equitable principles in determining the validity of cheque transactions in the presence of overdrawn accounts.

Orders

Orders of the court

1. Plaintiffs’ action is dismissed.

2. Liberty to apply re costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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