Sitting as an arbitrator, the court had to determine the time and place at which a bank presenting a cheque for payment through the clearing system was discharged of its responsibility towards its customer. It was contended for the respondent that delivery at the clearing house was, by agreement or by usage of the banks, treated as equivalent to presentation and therefore amounted to a waiver of the normal obligation to present at the paying bank.
Held: In the case of a bank receiving a cheque from a customer for collection through the interbank clearing system, the presenting bank’s responsibility to its customer in respect of the collection of the cheque is discharged only when the cheque is physically delivered to that branch of the paying bank on which it is drawn, for a decision whether it should be paid or not.
The court differentiated the use of banking practice to decide whether a bank has complied with a duty imposed on it by contract, and the use of such practice, if unknown to the customer, to inform the meaning of the contract itself.
Bingham J rejected the contention that there was any agreement to treat delivery at the clearing house as dispensing with the need for presentation at the bank. In a concluding, and obiter, passage of his judgment he said that if the drawer was to lose any right which he possessed ‘as a result of a private agreement between banks for their own convenience the very strongest proof of his knowledge and assent would be needed’. He also said this: ‘In deciding whether presentation in a given way, as through the clearing house, is a proper and reasonable discharge of the presenting banker’s duty to his customer, reference to the ordinary usage and practice of bankers is very relevant, and likely in most cases to be decisive (see, for example, Hare v Henty (1861) 10 CBNS 65, 142 ER 374, Prideaux v Criddle (1869) LR 4 QB 455), but the usage and practice contended for here, even if proved, could not without more derogate from the presenting bank’s duty to its customer. ‘
Judges:
Bingham J
Citations:
[1985] 1 All ER 385
Jurisdiction:
England and Wales
Citing:
Cited – Hare v Edwin Henty And George Henty 7-May-1861
A country banker receiving from a customer a cheque for presentment drawn upon another country banker not resident in the same town, is not bound to transmit it for presentment by the post of the day on which he receives it, but has until post-time . .
Cited – Prideaux v Criddle 1869
. .
Lists of cited by and citing cases may be incomplete.
Banking
Updated: 28 May 2022; Ref: scu.561156