Smith v Commercial Banking Co of Sydney Ltd

The appellant, Mr. Smith, sued the Commercial Banking Company of Sydney Ltd. as the acceptor of a £30 draft. Smith had obtained the draft in England, payable to his order, and posted one part to himself in Sydney. Upon arrival, he discovered the draft had been misdelivered by the Post Office and that the bank had already paid the £30 based on the first part of the draft. The bank denied acceptance and sought protection under section 60 of the Bills of Exchange Act 1887 (NSW), which provides a defence for bankers paying bills in good faith and in the ordinary course of business despite a forged indorsement.

The court was required to determine two primary legal issues. Firstly, whether the actions of the bank constituted an acceptance of the bill, thereby making them liable to the appellant. Secondly, if an acceptance was found, whether the bank was nevertheless protected by section 60 of the Bills of Exchange Act 1887 (NSW) from liability due to the forged indorsement.

The court held that the signature of the bank's officer, "John Bull," and the bank's stamp on the draft did not amount to a valid acceptance under the Bills of Exchange Act 1887 (NSW). Acceptance requires the signification of assent to the drawer's order, which must be written on the bill and completed by delivery. The court found that there was insufficient evidence to establish that the bank's signature or stamp was on the bill at the time of delivery to the thief, which is a necessary element for acceptance. Furthermore, the court determined that section 60 of the Bills of Exchange Act 1887 (NSW) only protects a banker when a bill has been negotiated by indorsement before it is presented for payment. In this case, the thief's signature was obtained for identification purposes, not for negotiation, and therefore did not fall within the protection of the section.

The High Court affirmed the decision of the Supreme Court of New South Wales, which had set aside the verdict for the plaintiff and entered a verdict for the defendants. However, the High Court reached this conclusion on different grounds, finding that no valid acceptance had occurred, and therefore the bank was not liable as an acceptor.