CHAPTER XVIII.

DEPOSITS AND THE CURRENT ACCOUNT.

The receiving of deposits and the honouring of cheques upon them may be considered as the primary function of a bank, see Chapter XV., supra, on the "Business and Powers of a Bank." The discussion in this chapter will partially include the rights and liabilities of a bank in respect to cheques drawn upon it. See also secs. 165, et seq., of the Bills of Exchange Act, Chapter LI., infra.

The subject of a bank's lien upon securities or money of the customer in its hands is discussed in the notes to sec. 77.

As to the duty of the bank in regard to its customer's acceptances made payable at the bank, see notes, supra, p. 132.

95. The bank may, subject to the provisions of this section, Deposits without the authority, aid, assistance or intervention of any may be other person or official being required,

received
from persons

contract

(a) receive deposits from any person whomsoever, whatever unable to his age, status or condition in life, and whether such person is qualified by law to enter into ordinary contracts or not; and,

(b) from time to time repay any or all of the principal thereof, and pay the whole or any part of the interest thereon to such person, unless before such repayment the money so deposited in the bank is lawfully claimed as the property of some other person.

2. In the case of any such lawful claim the money so de- Payments posited may be paid to the depositor with the consent of the by consent. claimant, or to the claimant with the consent of the depositor.

limited.

3. If the person making any such deposit could not, under Deposit the law of the province where the deposit is made, deposit and withdraw money in and from a bank without this section, the total amount to be received from such person on deposit shall

14-BANK ACT.

Sec. 95. not, at any time, exceed the sum of five hundred dollars. 53 V., $500.

c. 31, s. 84.

This section dates from 1890, except for some re-arrangement of the wording in 1906. The Acts of 1867 and 1871 authorized the bank merely to open offices of discount and deposit.

The section enables a bank in receiving deposits, to some extent, to deal with persons otherwise incompetent by provincial law to contract (Re Central Bank, Morton and Block's Claims, 1889, 17 O.R. at p. 584.) Up to an aggregate amount of $500 the bank may receive deposits from any person without regard to whether by provincial law such person could deposit money in, and withdraw money from, a bank.

As to the jurisdiction of Parliament to override provincial law in this respect, cf. Tennant v. Union Bank, discussed in the notes to sec. 88.

Locality of deposits.

A bank with regard to deposits received and deposit receipts issued is resident in the province where the transaction takes place, and the deposit receipt has a locality in that province, so that the estate to which it belongs may be liable to succession duty in respect of it, although the deceased payee was domiciled in a foreign country (Attorney-General v. Newman, 1901, 1 0. L.R. 511; In re Succession Duty Act, 1902, 9 B.C.R. 174), and the bank may be served and the deposit attached in that province as a debt due to the depositor. (County of Wentworth v. Smith, 1893, 15 P.R. 372.) The bank is protected by payment into court in pursuance of order of court made in the province where the deposit is situate. (Harris v. Cordingly, 1899,

Q.R. 16 S.C. 501.)

Bank a debtor in respect of deposits.

The bank is a debtor to the customer (Foley v. Hill, 1848, 2 H.L.C. 28; Robarts v. Tucker, 1851, 16 Q.B. 560; Webb v. Derbyshire, [1906] 1 Ch. 135), not a bailee or a trustee (Ex parte Waring, 1866, 36 L.J. Ch. 151), in respect of money deposited with it, and not actually appropriated to a particular purpose. (Farley v. Turner, 1857, 26 L.J. Ch. 710.)

And the relation is still that of debtor and creditor if the customer has overdrawn his account. (Cunliffe Brooks v. Blackburn, 1884, 9 App. Cas. 857.)

It follows that upon the insolvency of the bank the customer has merely a right of proof in respect of his current or deposit accounts. (Re Barned's Bank, 1870, 39 L.J. Ch. 635.)

It follows also that the bank can be discharged only by payments made to the customer, his agent or principal (Sims v. Bond, 1833, 5 B. & Ad. 389), or to some person who by mercantile law can give a good discharge.

Interest on deposits.

Interest is not payable on a deposit or loan except by statute or by express agreement (Edwards v. Vere, 1833, 5 B. & Ad. 282; in re Gosman, 1881, 17 Ch. D. 771), or where a contract to pay interest may be implied from the mode of dealing between the parties (In re Duncan & Co., [1905] 1 Ch. 307; In re East of England Banking Co., 1868, L.R. 4 Ch. 14), the usage of trade, or other circumstances.

By section 92 the bank may allow any rate of interest whatever upon money deposited with it. Interest-bearing deposits must be distinguished from other deposits in the annual statement (sec. 54).

Obligation to repay deposits and to honour cheques.

The bank must pay its customer's cheque on presentation if it has funds sufficient to meet the cheque. (Marzetti v. Williams, 1830, 1 B. & Ad. 415, 3 R.C. 746; Perreault v. Merchants Bank, 1905, Q.R. 27 S.C. 149.)

Substantial damages may be given for dishonouring a customer's cheque, even though proof of special damage be inadmissible (Fleming v. Bank of N.Z., [1900] A.C. 577). But if a non-trading depositor in the savings department of a bank has made his deposit subject to special terms, he may, on the wrongful refusal of the bank to pay to him personally the amount of the deposit, recover as damages only the interest and the money. The bank having received a deposit subject to certain notice of withdrawal, if required, cannot set up, as a defence to an action for the deposit, the absence of such notice, unless the refusal to pay was based on that ground. (Henderson v. Bank of Hamilton, 1894, 25 O.R. 641, 22 A.R. 414.)

Sec. 95.

Sec. 95.

If a customer's cheque is presented for payment, the bank must decide whether the state of the account between it and the customer will justify it in paying the cheque. If the cashier or teller counts out the amount of the cheque and places the money upon the counter or the ledge of the wicket in front of him, the payment is complete and cannot be revoked by the bank, even though the money has not been counted and accepted by the person presenting the cheque. (Chambers v. Miller, 1862, 13 C.B. N.S. 125; and cases cited in Hall v. Hatch, 1901, 3 O.L.R. 147.) The property in the money passes from the bank to the payee of the cheque so that it can be attached as his property even before he has touched it with his hand. (Hall v. Hatch, supra.)

The bank must pay cheques in the order of presentation (Kilsby v. Williams, 1822, 1 B. & Ald. 815), unless the bank has notice of the death of the customer or of a countermand of payment by him (Bills of Exchange Act, sec. 167). In Marzetti v. Williams, supra, and Robarts v. Tucker, 1851, 16 Q.B. 560, it is said that the banker is entitled to a reasonable time to satisfy himself of the genuineness of the signature to a cheque or bill of exchange. Cf. Todd v. Union Bank, 1887, 4 Man. R. 204. But in Bank of England v. Vagliano, [1891] A.C. at p. 157, Lord Macnaghten expressly lays it down that bankers who undertake the duty of paying their customers' acceptances must pay off-hand, and this reasoning would seem to apply equally to cheques.

A bank contracting for valuable consideration with a customer's agent or a third party to honour the customer's outstanding cheques is liable to be sued by the customer for breach of contract in the event of the specified cheques being subsequently dishonoured. (Fleming v. Bank of New Zealand, [1900] A.C. 577.)

Pass-book and vouchers.

The effect of receipt from a bank of a pass-book and vouchers, and their retention without comment by a customer, are considered in Rex v. Bank of Montreal, 10 O.L.R. 117, by Anglin, J., who decided that there is no contractual obligation on the part of the customer to examine his pass-book. This case was affirmed by the Court of Appeal, 1906, 11 O.L.R. 595. Maclaren, J.A., at p. 605, says: "The trial judge has reviewed very

fully the leading English and American cases in which the Sec. 95. effect of the receipt from a bank of a pass-book and vou- Pass-book chers, and their retention by the customer have been considered and vouchers. and discussed. He comes to the conclusion that under the principles laid down in Leather Manufacturers' Bank v. Morgan, 1866, 117 U.S. 96, and De Frees Critten v. Chemical National Bank, 1902, 171 N.Y. 219, the customer might be held in the United States to be estopped from objecting where he had failed to check over his pass-book himself or had not exercised reasonable supervision over the clerk to whom he had entrusted it under circumstances where he would not be estopped in England. In support of this conclusion he refers particularly to the case of Chatterton v. London and County Bank, 1890-1, a summarized report of which appears in Paget on Banking, at pp. 120 et seq., and also to the cases discussed in Hart on Banking at pp. 200-203. It is to be observed that in most of these cases the question considered is whether the customer who receives his pass-book and vouchers owes a duty to the bank to examine them, and whether he is estopped from objecting if he does not do so, or does not object before the bank has altered its position. In the present case there is more. The department regularly notified the bank each month that the cheques and statement had been found correct. Such receipts are not at all on the same footing as those that are frequently signed by the messenger of the customer when he receives the cheques and vouchers at the end of the month or at other periods. These latter can have little binding effect unless there is an express or implied contract that the customer will examine them and report within a reasonable time as to their correctness. Ordinarily the retention of the pass-book and the vouchers without objection could only operate against the customer where there existed such a contract by way of estoppel, and where the facts of the particular case were such as to justify the application of this doctrine." Rex v. Bank of Montreal was affirmed by the Supreme Court on the 19th of February, 1907.

A banker's pass-book, which is numbered and in which it is stipulated that the deposits recorded in it will not be repaid without its production, is a proper subject of donatio mortis causa, and delivery of such a book in anticipation of death operates as a transfer of the debt to take effect upon death. (Brown v. Toronto General Trusts, 1900, 32 O.R. 319.)