Jet Fuels Petroleum Distributors Pty Ltd v Australia and New Zealand Banking Group Limited No. SCGRG 93/1427 Judgment No. 4193 Number of Pages 10 Banking and Financial Institutions (1993) 61 Sasr 413

[1993] SASC 4193

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA PERRY J

CWDS
Banking and financial institutions - request by the holder of the cheque in person over the counter of the payee bank for a special answer - intimation in response given verbally that the cheque would be met - held that the answer constituted an agreement to pay which bound the bank, but it did not constitute payment of the chegue within the meaning of s.67 of the Cheques and Payment Orders Act 1986 (Commonwealth) - before the cheque was paid, the bank was notified of the bankruptcy of the drawers - held that s.125 of the Bankruptcy Act 1966 (Commonwealth) was then of application to oblige the bank not to make any further payment out of the account - decision by the learned Special Magistrate constituting the Magistrates Court dismissing the holder's claim against the drawee bank for the amount of the cheque upheld on different grounds. Cheques and Payment Orders Act 1968 (Commonwealth) s 67 and Bankruptcy Act 1966 (Commonwealth) s 125. H.H. Dimond (Rotorua 1966) Ltd v ANZ BankinG Group Ltd (1979) NZLR 739, considered.

HRNG ADELAIDE, 21 September 1993 #DATE 24:12:1993
Counsel for appellant:     Mr I.C. Robertson
Solicitors for appellant:    Piper Alderman
Counsel for respondent:     Mr G A Stevens
Solicitors for respondent: Knox and Hargrave

ORDER
Appeal dismissed.

JUDGE1 PERRY J The appellant appeals against the dismissal of its claim for $17,352.89 being the amount of a cheque presented by it for payment by the respondent bank. The action was heard by a learned Special Magistrate constituting the Magistrates Court. In its Notice of Appeal the appellant claims essentially that the learned Magistrate erred in his application of s.67 of the Cheques and Payment Orders Act (Commonwealth) 1986 to the facts of the case. I will refer to the terms of that section in due course. 2. As its name implies, the appellant is a supplier of petroleum fuels. Commission agents sell fuel supplied by the appellant on its behalf. It has depots throughout the State. Ordinarily, the commission agents send in returns to the plaintiff either daily or weekly, with a cheque for the fuel sold. 3. The cheque in question, which was a cheque drawn on the account of T.D. and A.J. Bayne who conducted a commission agency for the appellant at Princes Highway, Port Wakefield, represented the proceeds of fuel sold. The cheque was signed by Mr T Bayne and was drawn on an account in the name of T.D. and A.J. Bayne with the ANZ Bank, Balaklava. The cheque was dated 26 November 1991. 4. Evidence was given of the receipt of the cheque and the circumstances in which it was presented for payment by a Mr Songer, the sales administration manager of the appellant. The learned Special Magistrate accepted his evidence without qualification, and preferred it, and the evidence of a Mr Wittman, then manager of the Gawler branch of the Commonwealth Bank, where their evidence differed from the evidence of two bank officers who were called on behalf of the respondent. Those officers were Mr Scholz, a teller, and Mr Dunstan, accountant, both employed at the relevant time at the ANZ Bank, Balaklava. 5. Even without having had the benefit of seeing the witnesses testify, the evidence of the two ANZ officers was so inherently improbable that the Magistrate was clearly right in rejecting their evidence on the critical issues. In dealing with the facts of the case, I have, therefore, preferred the evidence of Songer and Wittman where there is a conflict between their evidence and that of the other witnesses. 6. On 28 November 1991, the appellant lodged the cheque in question, together with other cheques, over the counter of the Commonwealth Bank at Gawler, where it conducted an account, with a view to its collection by the Commonwealth Bank. The lodgment of the cheque, which was accompanied by a "deposit slip", was not accompanied by any instructions that it be dealt with other than in the ordinary course of banking business. 7. On 2 December 1991, the appellant received from the Commonwealth Bank a written advice dated the same day to the effect that the cheque had been returned unpaid. That advice indicated that the answer which the bank had received upon the presentation of the cheque was "present again". 8. As well as receiving the written advice slip, Songer also received a telephone call from Wittman on the same day, that is, 2 December 1991, to let him know that the cheque had been dishonoured. During that telephone call, Wittman agreed to contact the ANZ Bank to inquire whether the cheque was likely to be met if re-presented. 9. After his conversation with Songer, Wittman rang the ANZ Bank at Balaklava and asked to speak to the manager. The manager was away at the time. Dunstan was acting as relieving manager. Wittman informed Dunstan of the dishonour of the cheque, and asked whether, if it was presented again that day, there would be sufficient funds in the account to meet it. Dunstan replied to the effect that there were sufficient funds in the account to "cover" the cheque. 10. After receiving that information, Wittman rang Songer again and suggested that the best course to follow would be for him to come to the bank, collect the cheque, take it to the ANZ Bank and present it in person. 11. Songer agreed. He drove to Gawler and collected the cheque from the Commonwealth Bank. He immediately drove on to Balaklava, where he arrived at the ANZ Bank at about mid-day. He spoke to the teller, Scholz. Songer's evidence of what transpired is as follows:
    "Q. Can you tell us what happened next.
    A. I asked the young fellow on the other side of the counter.
    I had a cheque with me, 'could you please get a quick clearance
    on this cheque'.
    Q. Did you use the words 'quick clearance' or is that a
    summary.
    A. No, I used the words 'quick clearance'. He said he wasn't
    in a position to do that, he would have to speak to the assistant
    manager or accountant. He disappeared into an office on the side
    of the bank.
    Q. What happened after that.
    A. He came out of the office and said 'I am sorry, the
    assistant manager was on the phone, would I mind waiting'. I
    said 'No, it was fine'.
    ...
    Q. Did the assistant manager eventually appear at the front
    counter.
    A. When the assistant manager came off the phone the young
    teller went back into his office for 30 seconds or so. And then
    both came up to the counter.
    Q. What happened.
    A. The assistant manager proceeded to key data into the
    computer screen on the front counter and after 10, 15 seconds
    spoke to the young teller and said 'Yes, that will be OK' or
    words to that effect.
    Q. Could you see the computer screen from where you were
    standing.
    A. No, not directly, no, not at that point of time anyway.
    Q. Did you have your deposit book with you.
    A. I did.
    Q. Did you present that deposit book with the cheque.
    A. Yes I did. ..." 12. Songer's evidence was that after handing over the deposit slip, Scholz stamped it. He went on to say in evidence:
    "A. As I turned to walk away I made a comment 'is that
    all OK'.
    Q. Who did you say that to.
    A. I turned back and actually said it to the two people
    standing at the counter or just backwards from the counter.
    Q. Did you receive a response.
    A. I received a response from the assistant manager who said
    'It's all OK', 'all fixed'. I am sorry that's the word he used." Having received that response, Songer returned to Gawler. 13. The assurance given to the appellant that the cheque would be met was to prove short-lived. 14. In the afternoon of the same day, that is, 2 December, Dunstan received a telephone call from an employee of the Official Receiver's Office to say that Mr and Mrs Bayne had earlier that day filed a debtor's petition in bankruptcy. A copy of the petition was tendered as an exhibit at the hearing. It was a petition pursuant to s.56 of the Bankruptcy Act 1966 (Commonwealth), against the partnership conducted by the Baynes. 15. From endorsements on it, it appears that the petition was accepted by the Registrar in Bankruptcy at 11.35 am on 2 December 1991. By force of s.56(4) of the Act, the members of the partnership, that is, Mr and Mrs Bayne, became bankrupt upon that endorsement being made, in this case, from 11.35 am on that day. 16. Dunstan's evidence was that he received a call in the afternoon, he did not say when, from the Official Receiver's Office to inform him of the presentation of the petition. That call was received after the transaction which had taken place at about mid-day over the counter of the bank with Songer. On receipt of the advice as to the Baynes' bankruptcy, Dunstan suspended further operation of the account. As will be seen, pursuant to s.125 of the Bankruptcy Act, the respondent was obliged at least to make no further payments out of the account. 17. Despite the suspension of the account, the cheque in question, together with all of the other cheques banked that day, made its way overnight to the clearing house at Adelaide, but the cheque was dishonoured. The ANZ Bank purported to answer it "refer to drawer". 18. It is not quite clear from the evidence when that was noted on the cheque, but a notice of dishonour was apparently forwarded from ANZ Bank to the Commonwealth Bank on 3 December, and on 4 December 1991 a written notice was given by the Commonwealth Bank to the appellant indicating that the answer on the cheque was "refer to drawer". 19. On receipt of that notice, Songer rang the ANZ Bank at Balaklava and spoke to Dunstan. Songer's evidence as to the conversation with ensued was:
    "A. Basically I made the comment to the assistant manager
    that I was disturbed to hear from the Commonwealth Bank that
    this cheque had been dishonoured after I presented the cheque to
    him and his teller two days earlier. In fact I had asked for a
    quick clearance and my understanding was everything was OK and it
    was all fixed before I left the bank. His comment to me was
    'Well, the fellow declared himself bankrupt later that day and we
    reversed the cheque'.
    Q. Was that a long telephone conversation or a short telephone
    conversation.
    A. It went on for some time after that. I continued to make
    the point I believed the cheque had been cleared and as far as we
    were concerned that was the case. He kept referring back to the
    fact that their customer was declared bankrupt and therefore they
    weren't in a position to honour the cheque.
    Q. Now during the course of that conversation did this person
    'John' make any response to your suggestion that you had asked
    for a quick clearance of the cheque.
    A. At no time did he make any, make any point that I had asked
for a quick clearance. He didn't deny I had or say that I had." 20. A copy of the bank statement of Mr and Mrs Bayne was tendered. It showed a closing balance of an amount in excess of $51,000 debit on 29 November 1991. The next transaction recorded is a small transfer on 3 December 1991. No entries appear in the bank statement with reference to the cheque in question. The cheque is, however, recorded in an account maintained by ANZ entitled "Entry Suspense Report - Current Account" in which a debit corresponding with the amount of the cheque is recorded on 2 December 1991. Presumably that entry was made after the Baynes' account was suspended. 21. Against that factual background, I move to consider how the claim was presented and dealt with by the learned Special Magistrate. 22. In its particulars of claim after setting out a summary of the facts, the plaintiff asserts: "7. The purported dishonouring of the cheque was invalid, ineffective and in breach of Section 67 of the Cheques and Payments Orders Act." 23. In its prayer for relief, the plaintiff sought:
    "1. A declaration that the defendant has paid the cheque
pursuant to Section 67 of the Cheques and Payments Orders Act
    1986 (Cwth).
    2. An order that the defendant credit the plaintiff's account
    with the defendant, with the sum of $17,352.89.
    3. In the alternative an order that the defendant pay to the
    plaintiff the sum of $17,352.89.
    4. .....
5. ....." 24. After the completion of the evidence but before final addresses, counsel for the appellant sought leave to amend to plead an estoppel. The amendment was refused. 25. The plaintiff then contended through its counsel that on a proper construction of the evidence, the cheque should be regarded as having been paid. In support of that submission, reliance was placed on s.67 of the Cheques and Payment Orders Act 1986 (Commonwealth). Relevantly, that section provides:
    "67.(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) in a case where a request under subsection 62(5) was made
    by it in relation to the cheque- the following matters, namely:
    (i) the making of the request;
    (ii) the nature of the request;
    (iii) the time within which the request was made;
    (iv) the means by which the request was made;
    (v) the means that were available to it for making the
    request;
    (vi) the relative speed, reliability and cost of those means;
    (vii) whether or not the request was complied with;
    (viii) if the request was complied with-the time within which
    the request was complied with;
    (ix) if the request was a request to furnish further
    particulars and the request was complied with-the nature of the
    particulars furnished to it;
    (x) the usage of banks in relation to the making of requests
    under subsection 62(5); and (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." 26. S.61(1) provides that a cheque is: "... duly presented for payment if a demand for payment of the cheque is made, in accordance with section 62 or 63, on the drawee bank by or on behalf of the holder." 27. Section 62 deals with presentment by a bank. That was not of application here, as the presentment in this case was by the holder of the cheque in person. 28. Section 63 therefore applies. That section provides: "A person other than a bank may present a cheque for payment by exhibiting the cheque, in person, to the drawee bank at the proper place in relation to the cheque at a reasonable hour on a day on which the drawee bank is open for business at the place at which the cheque is exhibited." 29. The "proper place" in relation to a cheque is defined by s.64, and includes "a place of business of the drawee bank". 30. There is no doubt that the cheque in question was duly presented for payment by Songer exhibiting it to the teller at the counter of the Balaklava branch of the defendant, and that that was "the proper place in relation to the cheque". 31. Once the cheque was duly presented for payment, there was an obligation upon the defendant to comply with s.67(1), and either "pay or dishonour the cheque" as soon as was reasonably practicable. The learned Special Magistrate dealt with the application of s.67 in his ex tempore reasons for judgment in the following passage:
"Now the defence here put by Mr Stevens as to Section 67
    (and I don't think it is necessary for me to stop here to
    traverse all of the matters that counsel have put to me
    particularly the course with the matters raised which we
discussed yesterday at length), is that, if Section 67 applies
    then it applies to its full force and effect and I have said to
    Mr Robertson this morning (and yesterday) that it seems to me
    there are difficulties here for a plaintiff to seek to reply upon
    s.67. I don't agree with what Mr Robertson puts to me about the
    issue of time and indeed we have discussed the matter this
    morning. Mr Robertson says that a true construction of what was
    occurring in the Songer/Scholz/Dunstan interchange at the bank at
    Balaklava was either of two things: He seeks to amend to reflect
    those in the alternative. The alternative, just so it is clear,
    although I have refused the amendment, the alternatives are that
what was here occurring was conduct that agreed with s.67 of the
    Cheques and Payments Orders Act or, in the alternative, that
    there had indeed been an agreement to pay the cheque. Now I put
    to Mr Robertson he cannot have both. He says that the purpose of
    the amendment would cancel the alternative and leave the court to
    determine which of those is available. Because I am against the
amendment I am left to consider only Section 67. Section 67 in
    my opinion provides an opportunity for the paying bank to handle
    the request for payment of the cheque within its ordinary course
    of business. Words 'as soon as reasonably practicable' are in my
    opinion indicative of that, and the lengthy nature of the matters
to be taken into account in s.67(2) are in my opinion strong
    indicia in the Act that some time indeed is a available. Now in
    my opinion the time that was reasonably available (given my
    acceptance of Songer's evidence that a request for a quick
    clearance was made) is the period taken. With the presentation
    by Songer, the delivery of the request for payment was made at
    about 12 noon (or thereabouts) so the period "reasonably
    practicable" would have its determination, in my opinion, at the
    commencement of business on the following day. That approach is
    in accordance with the evidence that Mr Stevens lead on this
    topic. It may indeed be a little shorter than Mr Stevens lead
    but in any event some appropriate time to enable the transaction,
    loosely called, to be recorded in the manner that this industry
    operates would have been required. Now there was of course a
    supervening activity. It was the act of bankruptcy, information
    about which was conveyed to the bank in the afternoon Because I
am against Mr Robertson as to section 67 it must follow in my
    view that the bank has met its obligation pursuant to s.125 of
    the Bankruptcy Act." 32. In my opinion, and with respect to him, the learned Special Magistrate erred in confining himself to a consideration of what period of time answered to the description "as soon as reasonably practicable" in s.67. 33. The learned Special Magistrate should first have addressed the question whether the response by the teller to the request for a "quick clearance" amounted to payment of the cheque. 34. Obviously had the amount of the cheque been handed over in cash, that would have been a payment within the meaning of s.67(1). But in my opinion, a favourable response to a special answer given across the counter of the bank did not constitute payment, but only an intimation that the cheque would be paid. 35. True it is that in those circumstances, that would ordinarily have secured the position of the holder of the cheque. The defendant having, in consideration of the fee payable for a special answer, intimated that the cheque would be met, it must be taken to have agreed with the holder of the cheque to pay it. If it were not for the operation of s.125 of the Bankruptcy Act, the plaintiff would be entitled to judgment against the defendant on the amount of the cheque, being an amount payable pursuant to an agreement to pay the cheque, or alternatively by way of damages, for failure to do so. It does not matter that the particular cause of action was not spelled out in the pleadings: the pleadings did not have to specify any cause of action. Paragraph 3 of the prayer for relief which sought an order "that the defendant pay to the plaintiff the sum of $17,352.89" was a sufficient plea to entitle the plaintiff to a judgment on the basis of an undertaking to pay constituted by the response to the request for a "quick clearance". There was no need for the plaintiff to attempt to rely upon estoppel. The words "quick clearance" were tantamount to a request for a special answer to the cheque, and a positive response to a special answer constitutes a binding obligation to pay. 36. Much time was taken up at the trial with evidence as to the procedures between banks, and in particular, the proceedings normally followed as between a collecting bank and a drawee bank as to payment when a special answer is sought. In my opinion, that evidence, although no doubt indicative of the procedures which are generally of application between banks, was irrelevant to the issues in this case. This was not a case where a collecting bank presented a cheque for payment by a drawee bank. If the Commonwealth Bank had retained possession of the cheque, and had taken it to the payee bank with a request for a special answer, the payee bank (i.e. the respondent) might well have provided the collecting bank with a warrant. 37. "Once payment by warrant has been accepted in complete satisfaction by the collecting bank it will constitute payment of the cheque from the moment of delivery of the warrant." (Weaver and Craigie, Banker and Customer in Australia, 2nd ed. page 5552 para 12.70.) Of course, there are other means by which a collecting bank may be regarded as having received payment of a cheque. In the case of the vast majority of cheques which are paid through exchanges or clearing houses, the rule which applies is stated in Weaver and Craigie (supra) p.5554 as follows: "If presentment has been made through a bank's clearing house the accepted rule in Australia has been that payment is final on expiry of the time prescribed by the clearing house rules for the return of unpaid cheques." (citing Riedell v Commercial Bank of Australia Ltd

(1931) VLR 382 at 384). The defendant also tendered a substantial volume of internal rules dealing with the manner in which a teller was authorised to deal with cheques, and as to procedures within the bank as to payment on a cheque. The internal procedures of the bank were likewise irrelevant to this case, in that if the teller, after conferring with the relieving manager, gave a clear answer to a request for a special clearance, the bank is bound by it, irrespective of any question of compliance with standing internal procedures. However, the internal procedures of the payee bank may nonetheless be relevant to determine the question as to when payment should be regarded as having been made (see H.H. Dimond (Rotorua 1966) Ltd v ANZ Banking Group Ltd (1979) NZLR
739.) 38. It seems to me that the construction which I have suggested should be placed upon the transaction between the appellant and the respondent, and in particular that there was an undertaking to pay the cheque and not an actual payment, is supported by the following passage from Paget's Law of Banking (10th ed) (1989) page 388:
    "The intimation, in response to inquiry, that a cheque
    would be paid, known as notifying its fate, though usually
    regarded as equivalent thereto as between bankers could hardly be
    regarded as payment within the Act. The courts regard the
    question and answer as to the fate of a cheque purely as a
    precaution taken by the collecting banker mainly for his own
    benefit; but it may be at the request of the customer paying it
in." 39. The Act there referred to is the Bills of Exchange Act 1882 (UK), and in particular s.59(1) of that Act which deals with the discharge of a bill by payment in due course. Although it follows that the statutory context of the passage which I have quoted is different, the word "pay" in s.67(1) of the Cheques and Payment Orders Act 1986 should be approached in the same way. 40. It does not follow that s.67(1) did not impose obligations upon the defendant with respect to the cheque in question. Indeed, the Act specifically provides that the provisions of s.67 (together with a number of other sections), cannot be modified by agreement (see s.6). Despite giving the special answer which it did, the respondent was nonetheless still obliged to go on and pay the cheque "as soon as is reasonably practicable", within the meaning of s.67. S.125 of the Bankruptcy Act apart, all that the defendant had done was to remove the option of dishonour. To do so, was not to breach s.6. 41. The relevant provisions in s.125 of the Bankruptcy Act are as follows:
    "125(1) Where a prescribed organization has ascertained
    that a person having an account with it is an undischarged
    bankrupt, then, unless the prescribed organization is satisfied
    that the account is on behalf of some other person, it ....
    subject to sub-section (2), shall not make any further payments
    out of the account ...
    (2) ...
    (3) In this section- ... "prescribed organization" means a
    bank ...." 42. When in the afternoon of 2 December 1991 the relieving manager Mr Dunstan received notification of the bankruptcy of Mr and Mrs Bayne, by force of section 125(1) the defendant could not "make any further payments out of" the Baynes' account. At the time of that notification, it could not be said that the time to pay the cheque had arisen. I agree with the learned Special Magistrate that the words "as soon as is reasonably practicable" in s.67 of the Cheques and Payment Orders Act gave to the defendant, in the circumstances, at least until the following morning to make payment. 43. The action of the defendant after deciding not to honour the cheque, in forwarding the cheque to the clearance house seems to have been an unnecessary step for it to take. By then it had become the collecting as well as the paying bank, and as payee it could simply have notified the Commonwealth Bank direct of the dishonour of the cheque. But that it did forward the cheque to the clearing house did not alter the legal position which had by then arisen. The situation would have been different if the Baynes' account had been debited with the amount of the cheque, and if the plaintiff's account with the Commonwealth Bank had been credited with payment, before notification of the bankruptcy. Likewise it would be different if a special answer had been given as between banks in a form regarded as binding between the banks, such as, for example, by delivery of a warrant. In the absence, however, of circumstances of that kind, it appears to me that the defendant took the only course open to it, having regard to s.125 of the Bankruptcy Act. 44. It will have been seen that although I have not adopted the reasoning of the learned Special Magistrate, in my opinion, he reached the right conclusion. 45. The appeal is dismissed.