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WHO IS A CUSTOMER?

22.-The relation of banker and customer is constituted where a person has funds in the hands of such banker, or is permitted by such banker to draw cheques upon him, or has an account with him, whether having at the time funds in such banker's hands or not (ƒ), and (g) may be constituted where cheques are habitually lodged with a banker for presentation on behalf of the persons lodging them, so that when honoured the amount is credited and paid out to such person, whether with or without any profit to the banker for so presenting them.

The mere cashing across the counter of cheques, of which a person is the payee or holder, does not constitute such person the customer of the banker so cashing such cheques.

Nor does the collection of a single cheque for a stranger, whether in consideration of a commission or not.

This is the law as laid down upon the construction of s. 82 in Matthews v. Williams, Brown & Co., 10 T. L. R. 386; Lacave v. Crédit Lyonnais, 1897, 1 Q. B. 148; G. W. Ry. Co. v. London and County Bank, 1901, A. C. 414.

In Kleinwort v. Comptoir d'Escompte, 1894, 2 Q. B. 157, s. 82 was not discussed, but the collection was for a stranger.

(ƒ) Clarke v. London and County Bank, 1897, 1 Q. B. 552. (g) Lord Brampton, 1901, A. C. pp. 422, 423.

BANKER A HOLDER IN DUE COURSE.

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The authorities stop short of saying that a man must have an account at a bank to be a customer. See Lord Brampton, 1901, A. C. at p. 422; but Collins, J., 1897, 1 Q. B. at pp. 154, 155, very nearly goes as far as that.

23.-A banker who places a cheque to the credit of a particular customer as cash thereby becomes a holder in due course of such a cheque, and as such may sue all parties liable thereon, unless such cheque has been made not transferable under s. 8 (1), in which case the property therein does not pass to such banker.

Ex parte Richdale, 19 Ch. D. 409; M'Lean v Clydesdale Bank, 9 A. C. 95; National Bank v. Silke, 1891, 1 Q. B. 435; Royal Bank of Scotland v. Tottenham, 1894, 2 Q. B. 715; Bissell v. Fox, 51 L. T. N. S. 663; G. W. Ry. Co. v. London and County Bank, 1901, A. C. 414; Gordon v. City and Midland Bank, 18 T. L. R. 157.

If the view taken in Ex parte Richdale be correct, the banker becomes holder in due course whether the customer was overdrawn or not, and has no recourse against him, except on his indorsement.

The view taken by the Privy Council in Gaden v. Newfoundland Savings Bank, 1899, A. C. 281, was that in such case the banker took only as the customer's agent for collection.

Ex parte Richdale and Royal Bank of Scotland

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CHEQUE CREDITED AS CASH.

v. Tottenham were cited in argument, but are not referred to in the judgment.

The facts were as follows:

The appellant drew a cheque on the X. bank, whose servant initialled it. She then paid it into her deposit account at the respondents' savings bank, who credited it to her in her pass book. The X. bank failed and dishonoured the cheque. The appellant contended that the respondent's bank took her cheque as holders, so that the loss fell on them. The Privy Council decided that, in the absence of express agreement, the respondents must be held to have taken the cheque as agents for collection only. It was also held that the only effect of a drawee bank initialling a cheque is to certify that it has funds of the drawer's sufficient to meet it.

In J. Bavins, junior v. London & S. W. Bank, 5 Com. Cas. 1, it was said that the crediting a cheque as cash was not a payment of the amount to the customer, but was conditional on the cheque turning out all right, but the action was not between the banker and the customer who paid in the cheque, and so the observations were not a decision on the point.

In Royal Bank of Scotland v. Tottenham the bank permitted the customer to draw against a cheque for 250l. paid in by her. When it was dishonoured, she became a debtor to the bank for 137., the

SEPARATE BRANCHES.

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amount which she drew against the cheque. Her cash balance, when she paid in the cheque, was practically nil. Here clearly the bank took the cheque as holders and could sue the drawer. In M'Lean v. Clydesdale Bank the cheque paid in by the customer was applied by the bank in reduction of his overdraft.

In National Bank v. Silke the cheque was credited to an overdrawn customer. This wiped out his overdraft and placed him in funds. He at once drew against the cheque, before it was presented, and when it was dishonoured his balance was very small. In deciding that here, as in M'Lean's case, the bank took as holders, Bowen, L.J., said (1891, 1 Q. B. at p. 439): "The case of M'Lean v. Clydesdale Bank makes it clear. . . that if a cheque is paid to a bank on a footing that the amount may be at once drawn upon, and it is drawn upon accordingly (h), the bank is a holder for value in due course."

Woodland v. Fear, 7 El. & Bl. 519, decided that where the Y. branch of a bank cashed a cheque drawn on the X. branch, in ignorance of the state of the drawer's account there, and at the date of Y. branch cashing it the X. branch had funds enough of the drawer's to meet it, but on presentment to the X. branch the cheque was dishonoured for lack of funds, the Y. branch could sue the person

(h) The matter is further considered in Chapter V.

to whom it gave cash for the cheque, as for money had and received, on the ground of failure of consideration. The branches were entitled to be regarded as separate parties. But where a party has an account at two branches of a bank, one showing a credit and the other a debt, the bank can combine the accounts and charge the credit account with the debt of the other. (Garnett v. McKewan, L. R. 8 Ex. 10.)

CAPACITY OF PARTIES.

24. Capacity to incur liability as a party to a cheque is co-extensive with capacity to contract.

A corporation cannot make itself liable as drawer (?) or indorser of a cheque unless it is competent to do so by the law for the time being in force relating to corporations (?).

Where a cheque is drawn or indorsed by an infant or corporation (?) having no capacity or power to incur liability on a cheque, the drawing or indorsement entitles the holder to receive payment of the cheque and to enforce it against any other party thereto. (S. 22.)

As regards corporations, the liability of a corporation as drawer, at any rate, of a cheque would appear to be governed by whether the contract in respect of which it was given was enforceable against the corporation or not.