56

BANKER COLLECTING FOR HIMSELF.

for the customer. But the Court of Appeal in Great Western Railway Co. v. London and County Bank, 1900, A. C., thought it possible to regard a bank cashing a cheque for a customer, not as purchasing it, but as advancing on the security of it.

In Clarke v. London and County Bank, 1897, 1 Q. B. 552, the cheque was paid in by a customer for collection, and was only credited to his account when paid, and this was the ratio decidendi. The fact that the customer was overdrawn and was allowed to draw a further sum against the cheque when paid in, before it was cleared, and that the bank applied part of the sum received on collection in repayment of the overdraft, did not deprive the bank of the protection of s. 82.

In the very recent cases of Gordon v. London City and Midland Bank and Gordon v. Capital and Counties Bank, 1902, 1 K. B. 242 and 158, Collins, M.R., distinctly says that the crediting of cheques to a customer without waiting to see whether they will be paid or not places the banker outside the protection of s. 82. "The defendants chose to treat these cheques as cash before they carried them to their destination, and they credited the customer with them at once, as if they were cash. This was not a case of receiving a payment for a customer, but for themselves," and he referred to the authorities in support of that view.

RECENT CASE IN COURT OF APPEAL.

57

In Gordon v. City and Midland Bank the facts were as follows:-Gordon's clerk received cheques payable in most cases to Gordon or order. He took the cheques in dispute to the defendants' branch, where he had an account, having in the majority of instances first crossed them; he forged his employer's signature to such of the cheques as were payable to "order," and at the defendants' request indorsed his own name to all the cheques to give them his personal security in the event of any being refused payment.

The bank credited him with the amounts in his account, and he drew on his account when he required money: but for these cheques his account would have been in debt. The plaintiff sued as true owner for the conversion of the cheques.

66

The cheques included—(1) "order" cheques and one "bearer" cheque drawn on other banks than the defendants' and paid in uncrossed, being crossed by the defendants for collection; (2) order cheques drawn on the banks and paid in crossed, including some crossed "not negotiable," and "bearer" cheques drawn on other banks and paid in crossed; (3) cheques drawn on other branches of the defendants' bank payable to order and paid in crossed; (4) bankers' drafts, addressed to the defendants' head office, drawn by a county manager and paid in uncrossed.

58

PREVIOUS CASES CONFIRMED.

The Master of the Rolls held

(1) As to all the "order" cheques not paid in crossed, there was clearly no defence, and the defendants, being outside the protection of s. 82 by having treated the cheques as cash on payment in before clearance, could not stand in a better position by subsequently crossing the cheques to themselves under s. 77. They did not thereby "purge their conversion."

(2) The cheques, being treated as cash by the defendant bank, were not collected "for a customer within s. 82, the fact that the bank required the customer's indorsement being evidence that the collection was on its own behalf, and therefore the bank was liable for conversion of all the "order" cheques drawn on other banks paid in crossed, including some crossed “not negotiable."

(3) As to the "order" cheques drawn on other branches of the defendants' bank, paid in crossed, which were paid by credit and debit entries in the books of the collecting and drawee branches respectively, the defendant bank was protected by s. 60 on the assumption that the payment was not "to a banker" within s. 79, or, assuming the converse, the payment was regular under that section.

(4) The banker's drafts were not within the Act, and were not brought within it by s. 17 of the

CREDITING A CHEQUE AS CASH.

59

Revenue Act, not having been issued by a 66 customer "to a banker.

As to the "bearer" cheques, including one paid in uncrossed, the plaintiff's counsel had admitted that the defendants were entitled to succeed (s. 31), acquiring a good title as holders for value.

The Lords Justices concurred.

In the second case the facts were identical, except that the defendant bank did not require the clerk's indorsement of the cheques paid in, and the judgment the same.

The effect of this decision is to confirm the view that the crediting of a cheque as cash before clearance deprives a banker of the protection of s. 82.

The other decisions in support of this view are collected in the notes to § 23, and, in spite of some contrary authority, it must be accepted as the law, although the alternative view, expressed in Gaden v. Newfoundland Savings Bank, 1899, A. C. 281, and J. Bavins, Junr. v. London and South-Western Bank, 5 Com. Cas. 1, that such a crediting is conditional only, seems more consonant to common sense and the opinions of bankers.

In Tate v. Wilts and Dorset Bank, Journ. XX. p. 376, the Divisional Court held that a banker was protected, who collected a cheque for a non

60

VOIDABLE AND DEFECTIVE TITLE.

customer, who, having obtained it by false pretences, had a voidable title to it.

But a similar contention by Lawrence, K.C., on behalf of the defendant bank in Great Western Railway Co. v. London and County Bank, 1901, A. C. p. 414, was quite unsuccessful.

A person who has a voidable title has a "defective title," and if he is not a customer, the banker who collects a cheque for him cannot be protected, as s. 82 provides that he is only to be protected if the person with a defective title, for whom he collects, is a customer.

A crossing "Account of J. F. M., National Bank, Dublin," does not restrict the transfer of the cheque within the meaning of s. 8. (National Bank v. Silke, 1891, 1 Q. B. 435.) It has no special efficacy.

In view of s. 73, there appears no reason to suppose that a cheque cannot be made "not transferable" under s. 8 (1), as well as " not negotiable ” under ss. 77 (4) and 81. The judgments of Fry and Lindley, L.JJ., in Silke's Case, and the language of s. 8 tend to confuse "not transferable" and "not negotiable." The question in Silke's Case was, "Was the cheque transferable ? " It was decided that the above crossing did not prevent a bank taking the cheque from J. F. M. from acquiring a title to it as holders and suing the drawer upon it. (See § 28 and notes and § 30 and notes.)