The plaintiff had drawn a cheque and sent it to the payee by post. The letter was stolen and the thief took it to the defendant, a banker, and used it to open an account. In doing so, he forged the payee’s endorsement. The defendant believed him to be the payee. He was not introduced to the bank and no references were obtained. The defendant opened the account and the cheque was specially cleared at the request of the thief, and he drew out the proceeds on the next day. On discovering the fraud, the plaintiff brought an action against the defendant for conversion. One question raised was whether the account having been opened by payment in all the cheques to be collected the defendant could be properly regarded as having received payment for a customer.
Held: Since the account had already been opened when the cheque was collected, payment had been received for a customer. The drawer thereupon sent another cheque to the real payee and took an assignment of his rights in the stolen cheque and, as holders of the cheque or alternatively as assignees, brought an action against the bank to recover the proceeds collected by the bank as money had and received to their use. Evidence had been given that it was the general practice of bankers to obtain a satisfactory introduction or reference.
The banker had acted in good faith, but was guilty of negligence in not taking reasonable precautions to safeguard the interests of the true owner of the cheque and that therefore he had put himself outside the protection of Section 82 of the 1882 Act. The banker would have been entitled to the protection of the section as having received payment for a customer, but had lost it owing to his want of due care. The relation of banker and customer began as soon as the first cheque was handed in to the banker for collection, and not when it was paid.
Bailhache J
(1914) 30 TLR 433, (1914) 111 LT 43, (1914) 19 Com Cas 256
Bills of Exchange Act 1882 82
England and Wales
Banking
Leading Case
Updated: 01 November 2021; Ref: scu.514413
