El Awadi v Bank of Credit and Commerce International SA Ltd
| Jurisdiction | England & Wales |
| Year | 1989 |
| Date | 1989 |
| Court | Queen's Bench Division |
Banking - Travellers' cheques - Loss or theft - Purchase agreement providing for refund of travellers' cheques lost or stolen - Issuers having discretion to disallow refund - Purchaser grossly negligent in safeguarding cheques - Whether term to be implied excluding refunds in cases of negligence or recklessness - Whether purchaser entitled to refund for stolen cheques
The plaintiff purchased from his bank £50,000 worth of Visa travellers' cheques in £100 denominations under a purchase agreement which provided by paragraph 3 that any claim for a refund of lost or stolen cheques was “subject to approval by the issuer.” In accordance with the agreement, he signed the travellers' cheques before leaving the bank. A few days later he took the cheques from his safe and put them in a wallet and then into a plastic bag which he placed between the front seats of his car. He thereafter left the car unattended on several occasions and finally parked it overnight on a private car parking space. The following day he discovered that the bag with the cheques in it had disappeared. He claimed a refund from the bank. Subsequently £40,700 worth of the stolen travellers' cheques were encashed and the issuers, in purported exercise of their discretion under paragraph 3 of the purchase agreement, refused to refund that sum to the plaintiff on the ground that he had been grossly negligent.
On the plaintiff's claim for reimbursement of the stolen cheques in the sum of £40,700: —
Held, giving judgment for the plaintiff, that paragraph 3 of the purchase agreement was to be construed as placing the issuers under an obligation to refund the purchaser of travellers' cheques that had been lost or stolen subject only to a discretion where the purchaser had failed to comply with the expressed or implied terms of the agreement; that, in the absence of an express term, the issuers could only rely on the plaintiff's gross negligence for refusing to refund the money if a term was to be implied into the contract absolving them from payment where there had been gross negligence or recklessness; that it could not be inferred that, at the time of the purchase, the parties would have agreed that the plaintiff's failure to properly safeguard the cheques would absolve the issuers from refunding the plaintiff for cheques lost or stolen and, since there were no other grounds for implying such a term into the contract, the plaintiff was entitled to a refund for the stolen cheques despite his most serious negligence (post, pp. 227H, 229F–G, 231B–E, E–F, 238B–F, G–H).
The following cases are referred to in the judgment:
Braithwaite v. Thomas Cook Travellers Cheques Ltd. [
Fellus v. National Westminster Bank Plc. (
Enez v. National Westminster Bank Plc. (unreported), 24 June 1983, Stuart-Smith J.
Greenwood v. Martins Bank Ltd. [
Lister v. Romford Ice and Cold Storage Co. Ltd. [
Liverpool City Council v. Irwin [
London Joint Stock Bank Ltd. v. Macmillan [
National Bank of Greece S.A. v. Pinios Shipping Co. No. 1 [
Sullivan v. Knauth (
Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd. [
ACTION
By a writ issued on 18 December 1985 and an amended statement of claim on 15 June the plaintiff, Moshen El Awadi, brought an action against the defendants, Bank of Credit and Commerce International S.A. (sued as Bank of Credit and Commerce International S.A. Ltd.), who were licensed deposit takers, seeking (i) a declaration that the plaintiff was entitled to a reimbursement of £40,700 being the balance outstanding of £50,000 in Visa travellers cheques, purchased by the plaintiff from the bank on 2 August 1985, which were stolen on or about the 17 August and subsequently encashed, (ii) payment to the plaintiff of £40,700, alternatively, damages and (iii) interest pursuant to section 35A of the
The facts are stated in the judgment.
Peter Cresswell Q.C. and Stephen Hockman for the plaintiff.
Nicholas Stadlen for the defendants.
5 September. HUTCHISON J. read the following judgment. This case is to do with an alleged theft of travellers' cheques. It gives rise to numerous difficult and interesting issues of fact and law which I shall have to consider in some detail, but of which I give a foretaste by saying that they include the following questions. (1) Were the cheques stolen at all? (2) If they were, is there some express or implied contractual right in the plaintiff to have them replaced or to be re-imbursed by the issuing bank? (3) If there is, is that right itself subject to an implied term that the plaintiff's right to recover is dependent on his having exercised care in the custody of the cheques: and if so, what degree of care? (4) Are the defendants liable in conversion for those cheques which ultimately found their way into their possession, but which they have not restored to the plaintiff: and if so, what is the measure of damage?
The history of the pleadings is a tortuous one and even their final state does not reflect all that was at one stage proposed. In the course of the hearing I rejected an application by the plaintiff to plead reliance on the
In the circumstances I think I should begin with a careful review of the pleadings in their final form.
By his amended statement of claim the plaintiff, Mr. El Awadi, asserts that in August 1985 he purchased from the defendants, Bank of Credit and Commerce International S.A. Licensed Deposit Takers (“the bank”), £50,000 worth of Visa travellers' cheques in £100 denominations; that it was an express or alternatively an implied term of the purchase agreement that should the cheques be stolen from or lost by him the bank would refund to him their full value; that on about 17 August they were stolen; and that the bank, despite requests to do so, has refused to refund their value, apart from £9,300, being the value of those stolen cheques which were not encashed. By amendment made during the trial the plaintiff claims, in the alternative, that following presentation of cheques to the value of £40,700 to the bank for payment it converted them, as a result of which he has suffered damage equal to their face value. There is also a conventional alternative claim for money had and received. So the plaintiff is claiming reimbursement of £40,700 in contract, and in the alternative the same sum as damages for conversion and/or as money had and received.
The defence, amended twice during the hearing, is to the following effect.
1. The purchase of the cheques is admitted to have taken place on 2 August, and is alleged to have been subject to the purchase agreement form which the plaintiff signed that day. The point is made that the issuer was not the bank but the Bank of Credit and Commerce International (Overseas) Ltd. (“B.C.C.I. Overseas”): but in a letter from the bank's solicitors it is made clear that no point is taken as to parties. Provisions of the purchase agreement (to which I shall have to refer in detail) are pleaded, the purport of which — so it is alleged — was that the bank was under no liability to refund the value of lost or stolen cheques. Particular reliance is placed on these words in the purchase agreement:
“Any claim for a refund of a lost or stolen cheque shall be subject to approval by the issuer and to presentation to the issuer of the purchaser's copy of this agreement.”
2. Alternatively it is said that if by the purchase agreement or otherwise the bank undertook to refund lost or stolen cheques, then it was an implied term of the purchase agreement that the plaintiff should take reasonable care of the cheques to ensure that they were not lost or stolen and further that he owed the bank such a duty, independently of contract. There follow allegations, to which I shall need to refer, detailing the circumstances of the theft, said to constitute a breach by the plaintiff of this implied term and/or duty.
3. The theft had originally been the subject of a “not admitted” plea. The only part of the proposed amendment to plead fraud that I allowed was the substitution for those words of a denial. I did this because it became clear, in the course of the argument about the proposed amendment, that the bank's predicament was that, while it was highly suspicious about the veracity (because of its supposed improbability) of the plaintiff's account of the loss of the cheques, it had no positive case of fraud which it could put forward; and it seemed to me that in the circumstances the modest amendment I did allow was appropriate.
4. The second of the amendments raised a plea that if there was an implied term obliging the bank to make refund of the value of lost or stolen cheques, it was part of that implied term that the bank was not obliged to make a refund in circumstances where it had reasonable grounds for believing that the plaintiff had been, or alternatively he had in fact been, dishonest and/or reckless and/or grossly negligent and/or negligent. The pleading goes on to allege: (i) that the plaintiff had...
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