PROTECTION TO COLLECTING BANKER

51

addition of the words "not negotiable" would have, in all probability, prevented the loss incurred by the defendants.

51. It is provided by s. 82 of the Act that

Where a banker in good faith and without negligence receives payment for a customer of a cheque crossed generally or specially to himself, and the customer has no title or a defective title thereto, the banker shall not incur any liability to the true owner by reason only of having received such payment.

It seems clear that the protection afforded by this section extends to crossed cheques which are marked "not negotiable." In Matthiessen v. London and County Bank, 5 C. P. D., on the corresponding section, s. 12, of the Crossed Cheques Act (39 & 40 Vict. c. 81), which united the present ss. 81 and 82, it was contended that the protection only extended to cheques so crossed, but no such argument could be raised on the present Act.

It is to be observed :

(1) The section only protects the banker if he receives payment without negligence.

Accordingly a banker who received payment of several cheques paid into his account by a customer, who was known to the banker to be only a commercial traveller, and who indorsed the cheques in the payee's, his principal's, name "per pro.," was

52

ONLY WHERE HE IS NOT NEGLIGENT.

held to be not entitled to rely on s. 82, it appearing that he made no inquiry from his customer's principal whether the customer had any authority to indorse the cheques. (Bissell v. Fox, 51 L. T. R.

663, 53 L. T. R. 193.)

And in Hannan's Lake View Central, Ltd. v. Armstrong & Co., 5 Com. Cas. 188, Kennedy, J., held that where the defendant bank collected cheques drawn in favour of the plaintiff company or order, and indorsed by the secretary of the plaintiff company, "Hannan's Lake View Central, Ltd., H. Montgomery, Secretary," and paid by him into his private account at the defendants' bank, the plaintiff company having, as the defendants knew, a separate account at another bank in London, they (the defendant bank) had not acted" without negligence," and could not rely on s. 82. See J. Bavins, Junr. v. London and South-Western Bank, 5 Com. Cas.

(2) The section only extends to the ordinary case of collecting from the banker on whom the cheque is drawn. It would not protect a banker who collected from the drawer of a cheque, dishonoured on presentment for payment, as debt collector for the payee or a subsequent indorsee. (See Gillespie v. International Bank of London, 4 T. L. R. 322; a peculiar case.) (3) The section only extends to receiving for a customer.

COLLECTION MUST BE FOR A CUSTOMER, 53

A banker who received payment for a casual stranger is, of course, not protected. (Matthews v. Williams, Brown & Co., 10 T. L. R. 386; Lacave & Co. v. Crédit Lyonnais, 1897, 1 Q. B. 148.) The collection was apparently for a stranger in Kleinwort v. Comptoir d'Escompte, 1894, 2 Q. B. 157; but this section was not discussed.

In Lacave v. Crédit Lyonnais (supra) the Paris branch of the defendant bank collected a cheque from the London branch for a stranger, and it was held that the presentation of the cheque to the London by the Paris branch was a conversion of the cheque in London by the Paris branch. Collins, J., in his judgment does not quite go so far as to say that a man, to be a customer, must have an account. He says: "Protection is only given to a bank, which does collect for a customer in the real sense, if he is a person who has an account at the bank; at all events, if he is a person whose relations are much nearer and closer than those of Ponce in this case.”

And Lord Brampton, 1901, A. C. at p. 422, says: "It is not necessary to say that the keeping of an ordinary banking account is necessary to constitute a person a customer."

In Kleinwort v. Comptoir d'Escompte (supra) the payee of a crossed cheque posted it to the plaintiffs, having specially indorsed it to them. It was stolen

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AND NOT FOR A STRANGER.

in transit, and a stranger, having obliterated the plaintiffs' name as indorsees, and substituted a special indorsement to himself, presented the cheque at the defendants' bank in Paris.

They collected it for him through their London agent and handed him the money. Cave, J., found as a fact that the obliteration occurred after the posting. He held that delivery to the post office was delivery to the plaintiffs, who obtained a good title by the indorsement to them, and that the conversion took place in London, when the defendants received the money, and so the case was governed by English law and the defendants were liable.

A man who, having no account, has habitually got crossed cheques, payable to his order, cashed for him across the counter, the bank subsequently collecting the amount for themselves, is not “a customer," nor is the payment received for him, but for the bank itself as holder in due course.

This is the decision of the House of Lords in Great Western Railway Co. v. London and County Bank, 1901, A. C. 414, 17 T. L. R. 700.

The facts were as follows—

H. obtained a cheque from the appellants by a false pretence. It was payable to H. or order, and crossed generally with the words "not negotiable." The respondent bank gave H. cash for the cheque,

THE DECISION IN THE HOUSE OF LORDS. 55

as they had done on previous occasions, and collected the cheque. H. had no account at the respondent bank.

The House of Lords held (1) that H. was not a customer; (2) that in any case, as the bank gave him cash for the cheque, the bank took it as a holder and not as agent for collection, and so the bank received payment for itself; and (3) that the bank could not, therefore, rely on s. 82 in an action by the appellant company for money had and received, or for damages for conversion of the cheque, and that the bank had no title as holder, inasmuch as the cheque was marked "not negotiable" and passed to the bank subject to the defect of title of H., the transferor.

The Court of Appeal, 1900, 2 Q. B. 464, had regarded H. as a customer, and had (dub. Vaughan Williams, L.J.) regarded the bank as agent for collection, not as holder of the cheque.

Lord Brampton, 1901, A. C. at p. 422, suggested that the collection of a cheque marked "not negotiable," without inquiry, might, in the circumstances, have been negligence, which in itself would have disabled the bank from relying on s. 82. In Bissell v. Fox, 51 L. T. R. 663, Denman, J. clearly took the view that where a cheque is at once placed to the customer's credit as cash, the banker subsequently collects it for himself and not