for stranger-Duty of inquiry-Nature of inquiry-True owner of cheque- Bills of Exchange Act 1909 (No. 27 of 1909), sec. 88. Practice-Appeal-Appeal from Judge without jury-Appeal on question of fact-

Duty of appellate Court.

Sec. 88 of the Bills of Exchange Act 1909 provides that "(1) Where a banker in good faith and without negligence receives payment for a customer of a cheque crossed generally or specially to himself, and the customer has no title or a defective title thereto, the banker shall not incur any liability to the trne owner of the cheque by reason only of having received such payment."

In order to obtain the protection of that section a banker is bound to take such precautions, in the interest of the true owner of a cheque which he is asked by a customer to collect, as the circumstances known to the banker require. Where no precautions have been taken the test of whether the banker has been negligent is: Was the transaction of paying in the cheque, coupled with the circumstances antecedent and present, so out of the ordinary course that it ought to have aroused doubts in the banker's mind and caused him to make inquiry ? The extent of the inquiry must be measured by what in the circumstances a fair-minded banker, paying due regard to the exigencies of banking business in relation to the person depositing the cheque, would consider it prudent to do in order to protect the interests of the true owner.

28 CLR 402

A man unknown to a banker was permitted to open an account with the bank by paying in a deposit of £5 in notes and four crossed cheques for collection, such cheques being made payable to a number or bearer, and marked "bank," or "not negotiable," or "bank, not negotiable." Without making any inquiries as to the man's title to the cheques, the banker collected them. On the follow- ing day the man, by an open cheque, drew out almost the whole of the amount to the credit of his account, and paid in for collection four other crossed cheques, including one drawn by the plaintiff payable to a number or bearer to which the man who paid it in had no title. These four cheques were collected by the banker also without inquiry. In an action by the plaintiff against the banker to recover the amount of the cheque drawn by him,

Held, that the circumstances in which the account was opened were such as to put the bank upon inquiry, that the duty of inquiry extended to the transactions of the next day, and that in the absence of reasonable inquiries the bank was guilty of negligence, and was not entitled to the protection of

Commissioners of Taxation (N.S.W.) v. English, Scottish and Australian Bank Ltd., (1920) A.C., 683; 36 T.L.R.,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading London Bank of Australia Ltd v Kendall

Details

AGLC: London Bank of Australia Ltd v Kendall [1920] HCA 53
Case: [1920] HCA 53
Decision Date: 27 August 1920

CaseChat Overview and Summary

The case of *London Bank of Australia Ltd v Kendall* involved an appeal to the High Court of Australia from the Supreme Court of New South Wales. The dispute concerned the liability of the London Bank of Australia Ltd (the appellant) to William Allan Kendall (the respondent) for the wrongful conversion of a cheque. The respondent alleged that the bank had negligently collected a cheque drawn by him, which had been paid into the account of a customer who had no title to it. The bank contended that it was protected by section 88 of the *Bills of Exchange Act 1909* (Cth), which provides a defence to bankers who, in good faith and without negligence, receive payment for a customer of a crossed cheque, even if the customer has a defective title.

The central legal issues before the High Court were whether the respondent was the true owner of the cheque at the time of its collection by the bank, and whether the bank had acted without negligence in collecting the cheque for its customer. The court was required to determine the extent of a banker's duty of inquiry when opening an account for a stranger and collecting cheques for that customer, particularly in light of the circumstances surrounding the opening of the account and the subsequent transactions. The court also considered its duty as an appellate tribunal when reviewing findings of fact made by a judge sitting without a jury.

The High Court, applying the principles established in *Commissioners of Taxation (N.S.W.) v. English, Scottish and Australian Bank Ltd*, held that the respondent remained the true owner of the cheque as it had not been presented to the Commissioners of Taxation in the form they required, and thus had not been accepted by them. Regarding negligence, the court found that the circumstances under which the account was opened by an unknown individual, involving the deposit of several crossed cheques, were sufficiently out of the ordinary course of banking to arouse doubts and necessitate inquiry. The court reasoned that the bank's failure to make reasonable inquiries, both at the time of opening the account and in relation to subsequent transactions, including the collection of the respondent's cheque, constituted negligence. The court emphasised that the duty of inquiry extended to all transactions where the circumstances reasonably required it to protect the interests of the true owner.

The High Court affirmed the decision of the Supreme Court of New South Wales. The appeal by the London Bank of Australia Ltd was dismissed, and the bank was found liable to the respondent for the amount of the cheque, as it had failed to establish that it had acted without negligence and was therefore not entitled to the protection afforded by section 88 of the *Bills of Exchange Act 1909*.

Orders