London Bank of Australia Ltd v Kendall

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*.