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Banking - From: 1985 To: 1989

This page lists 25 cases, and was prepared on 03 April 2018.

 
Barclays Bank plc v Bank of England [1985] 1 All ER 385
1985
ComC
Bingham J
Banking
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. "
1 Cites



 
 American Express International Banking Corporation v Hurley; ChD 1985 - [1985] 3 All ER 564; [1986] BCLC 52
 
Avon Finance Co Ltd v Bridger [1985] 2 All ER 281; [1985] CLY 1289
1985
CA
Brandon LJ
Banking, Undue Influence, Equity
The son arranged finance for his parents to move near to him. He borrowed money to help finance it, secured by an expensive second loan. He deceived his parents into executing the loan. After the son defaulted, the plaintiff sought possession. Held: The parents had signed the charge without exercising reasonable care, and their plea of non est factum failed. However the charge was voidable in equity. The plaintiff lender had appointed the son to act as their agents to secure the signatures of the parents and to their disadvantage. The finance company should not be allowed to take advantage of their agent's deceit.
1 Cites

1 Citers


 
Tai Hing Ltd v Liu Chong Hing Bank [1985] 2 All ER 947; [1985] 2 Lloyds Rep 313; [1985] 3 WLR 317; [1986] AC 80; [1985] UKPC 22
1985
PC

Commonwealth, Constitutional, Banking
(Hong Kong) The relationship between banker and customer is principally a contractual one between debtor and creditor. As between the banker and his customer, the risk of loss through forgery of the customer's signature falls on the banker unless negligence or other disentitling conduct of the customer precludes the customer's claim. No wider duty should be imposed on the customer beyond a duty not to act in a way that facilitates forgery and to make the bank aware of any known forgeries occurred: "The business of banking is the business not of the customer but of the bank. They offer a service, which is to honour their customer's cheques when drawn upon an account in credit or within an agreed overdraft limit. If they pay out upon cheques which are not his, they are acting outside their mandate and cannot plead his authority in justification of their debit to his account. This is a risk of the service which it is their business to offer."
The Board considered the need for the Board to follow earlier decisions of the House of Lords: "It was suggested, though only faintly, that even if English courts are bound to follow the decision in Macmillan's case the Judicial Committee is not so constrained. This is a misapprehension. Once it is accepted, as in this case it is, that the applicable law is English, their Lordships of the Judicial Committee will follow a House of Lords' decision which covers the point in issue. The Judicial Committee is not the final judicial authority for the determination of English law. That is the responsibility of the House of Lords in its judicial capacity. Though the Judicial Committee enjoys a greater freedom from the binding effect of precedent than does the House of Lords, it is in no position on a question of English law to invoke the Practice Statement (Judicial Precedent) [1966] 1 WLR 1234 of July 1966 pursuant to which the House has assumed the power to depart in certain circumstances from a previous decision of the House. And their Lordships note, in passing, the Statement's warning against the danger from a House of Lords' decision in a case where, by reason of custom, statute, or for other reasons peculiar to the jurisdiction where the matter in dispute arose, the Judicial Committee is required to determine whether English law should or should not apply. Only if it be decided or accepted (as in this case) that English law is the law to be applied will the Judicial Committee consider itself bound to follow a House of Lords' decision."
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[ Bailii ]
 
Barclay's Bank v Bank of England [1985] All ER 385
1985

Bingham J
Banking
The court rejected an argument that because it was the usage of bankers to clear cheques through the clearing house system, the obligation of a presenting banker to present the cheque for collection at the branch of the paying bank where the drawer had his account was discharged by delivery of the cheque to the clearing house: "The drawer of a cheque has a clear statutory right under section 45 of the 1882 Act (subject to section 46) to be discharged from liability if the cheque is not duly presented to him or his branch of the paying bank for payment. If it is to be said that the drawer loses that right as the result of a private agreement made between the banks for their own convenience, the very strongest proof of his knowledge and assent would be needed."
1 Citers


 
Esal Commodities v Oriental Credit Ltd [1985] 2 Lloyd's Rep 546
1985
CA
Ackner LJ
Banking
The parties disputed whether a letter was a performance bond or a guarantee. The words of the instrument were: 'We undertake to pay the said amount on your written demand in the event that the supplier fails to execute the contract in perfect performance' Held: The bond was payable on demand despite the fact that it referred to the supplier's failure to perform the underlying contract about which there was a dispute. The fact that an instrument makes reference to the contractual performance for which it is security and the circumstances which constitute default does not prevent it being a demand guarantee or performance bond.
Ackner LJ said: "If the performance bond was so conditional, then unless there was clear evidence that the seller admitted that he was in breach of the contract of sale, payment could never safely be made by the bank except on a judgment of a court of competent jurisdiction and this result would be wholly inconsistent with the entire object of the transaction, namely to enable the beneficiary to obtain prompt and certain payment."
1 Citers



 
 National Westminster Bank plc v Morgan; HL 7-Mar-1985 - [1985] AC 686; [1985] UKHL 2; [1985] 1 All ER 821; [1985] ANZ Conv R 251; [1985] 2 WLR 588
 
Scholefield Goodman and Sons Ltd v Zyngier [1986] AC 562; [1985] UKPC 31; [1985] 3 All ER 105; [1986] FLR 1; [1985] 3 WLR 953
16 Aug 1985
PC
Lord Brightman
Banking, Equity
(Victoria) By a mortgage executed in favour of the bank Mrs Zyngier covenanted to pay to the bank any sums which might be owed to it either by herself or by a named company, including any amounts for or in respect of any bills of exchange on which the company might be liable "either primarily or only in the event of any other person failing to duly pay the same". Lord Brightman: " The fundamental question in the present case, therefore, is whether upon the true construction of the bargain between the bank and Mrs Zyngier, Mrs Zyngier placed herself, as regards bills of exchange accepted by Zinaldi and thereafter dishonoured, in the position of a co-surety alongside the drawer or indorser; or whether, upon the true construction of the bargain, her liability to the bank upon a bill was intended to be limited to a case of default by the parties liable upon the bill. If it were the true meaning of the mortgage that the bank was required to call upon the parties to the bill before it called upon Mrs Zyngier to make good her default, then ex hypothesi no injustice ensued to the drawer upon the bank's adoption of that course and no case for the intervention of a court of equity could arise. If a third party (in the instant case Mrs Zyngier) guarantees a bill of exchange for the benefit of a bank which discounts it, the normal understanding will be that the surety guarantees that payment will be made by one or other of the parties to the bill who are liable upon it, whether as acceptor or drawer or indorser. It will not be the normal understanding that the surety intends to place himself on a level with the drawer, so as to be answerable equally with the drawer if the acceptor defaults. There is no reason why he should. There is no reason to suppose that, in a contract between the bank and the surety, the surety desires to confer a benefit on the drawer and to share with him the responsibility for a dishonoured acceptance. Nor is there any reason why the bank should wish to call upon the surety for payment until the parties to the bill have defaulted." and "Contribution is founded on the principle that equality is equity, and there is no room for the application of this doctrine unless the surety against whom contribution is claimed has placed himself on the same level of liability as the surety who claims contribution from him. It would be possible for a bank guarantee to be so worded that the surety deliberately places himself upon an equal footing with the drawer or indorser of the bill discounted by the bank, but it would produce an irrational result. It is not a construction to be adopted unless the intention is clear, because there is no reason why the bank and the third party who gives the guarantee to the bank should have such an intention."
1 Citers

[ Bailii ]
 
Swiss Bank Corporation v Brink's MAT Ltd [1986] QB 853
1986


Banking

1 Citers


 
Kings North Trust Ltd v Bell [1986] 1 All ER 423, CA; [1986] 1 WLR 119
1986
CA

Banking, Torts - Other
The wife claimed to have signed a legal charge in favour of the plaintiffs by virtue of her husband's fraudulent misrepresentation. The charge secured the business borrowings of the husband. She did not get independent advice. Held: The bank had entrusted the charge to the husband to have it signed by her. He was therefore acting as the bank's agent, and it was bound by his misrepresentations, and could not enforce the charge. Dillon LJ made it a necessary condition of such a finding that the creditor had entrusted to the husband the task of obtaining his wife's signature.
1 Cites

1 Citers


 
Siporex Trade SA v Banque Indosuez [1986] 2 Lloyd's Rep 146
1986

Hirst J
Banking, Litigation Practice
An instrument was issued by a bank under an obligation in an international trade agreement to provide a performance bond. The instrument was described in correspondence between the parties and the bank as a performance bond. Held: "There is in my judgment no real hardship on the bank in imposing this strict liability to pay. A performance bond is a commercial instrument. No bank is obliged to enter into it unless they wish to and no doubt when they do so, they properly exact commercial terms and protect themselves by suitable cross-indemnities, such as were entered into in the present case."
1 Citers


 
The Nefeli [1986] 1 Lloyds Rep 339
1986


Banking, Contract

1 Citers


 
MacKinnon v Donaldson, Lufkin and Jenrette Securities Corporation [1986] Ch 482
1986
ChD
Hoffmann J
Banking, Jurisdiction
A plaintiff in an English action had obtained an order against an American bank, served on its London office, requiring production of books and papers at its New York head office. Held: The court pointed out the distinction between "personal jurisdiction, i.e. who can be brought before the court" and "subject matter jurisdiction, i.e., to what extent the court can claim to regulate the conduct of those persons". The court should not, save in exceptional circumstances, impose such a requirement upon a foreigner, and, in particular, upon a foreign bank. The principle is that a state should refrain from demanding obedience to its sovereign authority by foreigners in respect of their conduct outside the jurisdiction. The need to exercise the court's jurisdiction with due regard to the sovereignty of others is particularly important in the case of banks. Banks are in a special position because their documents are concerned not only with their own business but with that of their customers. They will owe their customers a duty of confidence regulated by the law of the country where the account is kept. That duty is in some countries reinforced by criminal sanctions and sometimes by 'blocking statutes' which specifically forbid the bank to provide information for the purpose of foreign legal proceedings. If every country where a bank happened to carry on business asserted a right to require that bank to produce documents relating to accounts kept in any other such country, banks would be in the unhappy position of being forced to submit to whichever sovereign was able to apply the greatest pressure. An English court should not, except in connection with substantive litigation here or in exceptional circumstances, make orders seeking to control the conduct of foreigners abroad or affecting their assets abroad.
Bankers Books Evidence Act 1879 87
1 Cites

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 In Re Keenan Bros Ltd; 1986 - [1986] BCLC 242
 
In re Brightlife Ltd [1987] 1 Ch 200; [1988] VLY 306
1987
ChD
Hoffmann J
Insolvency, Banking, Company
A clause in a debenture gave a charge which provided that the chargor should not: "deal with its book or other debts or securities for money otherwise than in the ordinary course of getting in and realising the same which expression shall not authorise the selling, factoring or discounting . . of its book debts or other negotiable instruments" Held: Whilst purporting to create a fixed charge over present and future book debts and imposing restrictions on the sale, factoring or discounting of book debts, the debenture did not require the chargor to pay them into an account with the chargee. Reference to a "first specific charge" over book debts had to yield to the only conclusion from the rights in fact granted that the charge over book debts was a floating charge only.
Hoffmann J said: "But a floating charge is consistent with some restriction upon the company's freedom to deal with its assets. For example, floating charges commonly contain a prohibition upon the creation of other charges ranking prior to or pari passu with the floating charge. Such dealings would otherwise be open to a company in the ordinary course of its business." and
"I do not think that the bank balance falls within the term "book debts or other debts" as it is used in the debenture. It is true that the relationship between banker and customer is one of debtor and creditor. It would not therefore be legally inaccurate to describe a credit balance with a banker as a debt. But this would not be a natural usage for a businessman or accountant. He would ordinarily describe it as "cash at bank": compare the balance sheet formats in Part I, section B of Schedule 4 to the Companies Act 1985" and "In this debenture, the significant feature is that Brightlife was free to collect its debts and pay the proceeds into its bank account. Once in the account, they would be outside the charge over debts and at the free disposal of the company. In my judgment a right to deal in this way with the charged assets for its own account is a badge of a floating charge and is inconsistent with a fixed charge."
The significant feature of the Brightlife debenture was that the company was free to collect its debts and pay the proceeds into its bank account: "Once in the account, they would be outside the charge over debts and at the free disposal of the company. In my judgment a right to deal in this way with the charged assets for its own account is a badge of a floating charge and is inconsistent with a fixed charge."
The company had given a charge over its book debts to te bank. The bank asserted that it was a first specific charge and purported to restrict the company's right to factor its debts without the bank's consent. A debenture holder then gave notice to fix the charge, but only a week before a voluntary winding up resolution. Held: The charge on the book debts was a floating charge, and having crystallised a week before, it had priority over the other debts.
Although clause 3(A)(ii)(a) referred to a 'first specific charge' over book debts and others, 'the rights over the debts created by the debenture were in my judgment such as to be categorised in law as a floating charge.' . . And a "significant feature is that Brightlife was free to collect its debts and pay the proceeds into its bank account. Once in the account, they would be outside the charge over debts and at the free disposal of the company. In my judgment a right to deal in this way with the charged assets for its own account is a badge of a floating charge and is inconsistent with a fixed charge . . I do not think that it is open to the courts to restrict the contractual freedom of parties to a floating charge on such grounds. The floating charge was invented by Victorian lawyers to enable manufacturing and trading companies to raise loan capital on debentures . . without inhibiting its ability to trade. . The public interest requires a balancing of the advantages to the economy of facilitating the borrowing of money against the possibility of injustice to unsecured creditors . . arguments for and against the floating charge are matters for Parliament rather than the courts."
1 Cites

1 Citers


 
Barclays Bank plc v Willowbrook International Ltd [1987] 1 FTLR 386
1987


Banking

1 Cites

1 Citers


 
Rae v Yorkshire Bank plc [1988] BTLC 35
1987
CA
O'Connor, Parker LJJ
Banking
The court considered the award of damages for the wrongful dishonour of its customer's cheque.
1 Citers



 
 Redman v Allied Irish Bank; 1987 - [1987] 2 FTLR 264

 
 Lipkin Gorman (a Firm) v Karpnale Ltd; 1987 - [1987] 1 WLR 987; [1992] 4 All ER 313
 
Re Hi-Fi Equipment (Cabinets) Limited [1988] BCLC 65
11 Jun 1987
ChD
Harman J
Banking
The company had charged by way of a first fixed charge all future freehold and leasehold property together with trade fixtures and otherwise. The company used heavy machinery which rested on the floor of its premises. The chargee claimed a fixed charge over the machinery. Held. The charge created one fixed charge over 'fixed plant and machinery'. Machinery which merely rested on the premises did not meet the requirement of being firmly attached to the premises. The machinery was therefore subject only to the floating charge and was available to the general creditors.
1 Cites


 
Babanaft International Co SA v Bassatne [1990] Ch 13; Independent, 30 June 1988; [1989] 1 All ER 433
30 Jun 1988
CA
Kerr, Neill and Nicholls LJJ
Jurisdiction, Banking, Litigation Practice
The court considered whether the state in which enforcement of a judgment will take place should be the place where the debt is situated upon which it is sought to execute. Held: There was nothing to preclude English courts from granting Mareva type injunctions against defendants extending to assets outside the jurisdiction, but the court insisted that there can be no question of such orders operating directly upon the foreign assets by way of attachment, or upon third parties, such as banks, holding the assets. The effectiveness of such orders for these purposes can only derive from their recognition and enforcement by the local courts, as should be made clear in the terms of the orders to avoid any misunderstanding suggesting an unwarranted assumption of extraterritorial jurisdiction.
Nicholls LJ was concerned at the "extraterritorial vice" of unqualified orders. He pointed out "The enforcement of the judgment in other countries, by attachment or like process, in respect of assets which are situated there is not affected by the order. The order does not attach those assets. It does not create, or purport to create, a charge on those assets, nor does it give the plaintiff any proprietary interest in then. The English court is not attempting in any way to interfere with or control the enforcement process in respect of those assets."
Kerr LJ said: "In my view, the key to the proper exercise of any extra-territorial jurisdiction must lie in the question whether there is international reciprocity for the recognition and enforcement of the type of order which is under consideration, in this case a Mareva injunction or a variant of it purporting to operate on the defendants’ assets abroad." and
"Apart from any EEC or EFTA connection, there is in any event no jurisdictional (as opposed to discretionary) ground which would preclude an English court from granting a pre-judgment Mareva injunction over assets situated anywhere outside the jurisdiction, which are owned or controlled by a defendant who is subject to the jurisdiction of our courts, provided that the order makes it clear that it is not to have any direct effect on the assets or on any third parties outside the jurisdiction save to the extent that the order may be enforced by the local courts. Whether an order which is qualified in this way would be enforced by the courts of states where the defendant’s assets are situated would of course depend on the local law . ."
Kerr LJ considered the standard proviso in such an order protecting the interests of third parties: "We understand that this is nowadays a standard type of proviso to Mareva injunctions, and it is of course inserted for the benefit of third parties who may be affected by the freezing order. My reason for quoting it is that it illustrates that, although Mareva injunctions are orders made in personam against defendants, they also have an in rem effect on third parties. It shows that, save to the extent of the proviso, the order is binding on third parties who have notice of the injunction. Although the passage in the judgment of Lord Denning MR in Z Ltd v. A [1982] 1 All ER 556 at 562, [1982] QB 558 at 573 headed ‘Operation in rem’ may well go too far in a number of respects, there cannot be any doubt that Mareva injunctions have a direct effect on third parties who are notified of them and who hold assets comprised in the order."
Neill LJ said: "I am satisfied, however, that the Court has jurisdiction to grant a mareva injunction over foreign assets, and that in this developing branch of the law the decision in Ashtiani v. Kashi may require further consideration in a future case."
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 In re A Company (No 005009 of 1987); Ex parte Copp; 1989 - [1989] BCLC 13

 
 Bank of Credit and Commerce International SA v Aboody; CA 1989 - [1992] 4 All ER 955; [1989] 2 WLR 759; [1990] 1 QB 923

 
 Lipkin Gorman v Karpnale Ltd; CA 1989 - [1989] 1 WLR 1340

 
 Cheah Theam Swee v Equiticorp Finance Group Ltd. And, Equiticorp Nominees Ltd; PC 12-Jul-1989 - [1989] UKPC 25
 
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