BANK PASS BOOKS AND STATEMENTS
| Date | 01 January 1954 |
| DOI | http://doi.org/10.1111/j.1468-2230.1954.tb02144.x |
| Author | J. Milnes Holden |
| Published date | 01 January 1954 |
BANK PASS BOOKS AND STATEMENTS
I
THE
late
Dr.
Hart in his
Law
of
Banking
wrote
:
“
It
is
.
. .
clear that the receipt by the customer of the pass
book containing an entry of the balance together with the
cashed cheques debited therein, and the return of the former
to the banker without objection being raised to any of the
entries, does not amount to a settlement
of
account in respect
of those entries; and that the mere omission
on
the part of
the customer to examine the entries and cheques with business-
like promptitude and care does not constitute negligence.”
Two distinct propositions are involved here:
(a)
the receipt and
return of the pass book do not constitute a settled account between
banker and customer, and
(b)
the customer is under
no
legal duty
to
examine his pass book.
There are comparatively few reported cases which support these
propositions, and
it
is open to the House of Lords to review them.
The oldest case which may be said to support them is
no
earlier
than
1890
and that was strongly criticised by contemporary writers.’
The courts in the United States have laid down rules governing this
aspect of the relationship between banker and customer which are
more
favourable to bankers than those enunciated by Hart.’
From
time to time bankers in this country are faced with heavy
losses when customers discover-sometimes after some years have
elapsed-that their accounts have been debited with forged cheques.
As
a general rule, a bank has
no
defence in this type of case to an
action by a customer claiming a declaration that his account has
been wrongfully debited4: in fact such claims are usually settled
in full by the bank concerned.
It
is
not
surprising that the banks
regard this as unjust-particularly in cases where the customer has
1
4th ed.,
1931,
p.
262.
p.
172.
2
See
post,
pp. 4P-43,
55,
note
55.
J
See Part
IV
of this article.
4
Aliter
if
the bank can show that the customer knew of the forgeries and kept
silent, with the result that the bank’s position has been prejudiced: see
Greenwood
v.
Martins Bank,
Lttl.
[lo321
1
K.B.
371,
C.A.;
affirmed
[1933]
A.C.
51.
Furthermore, the effect of McNair
J.’a
decision in
Brewer
v.
Westminster Bank, Ltd.
[1952]
2
All
E.R.
650
seems to be that where one
of
two parties
to
a
joint account forges the other’s signature
on
cheques
drawn upon the account (the mandate expressly providing that the bank shall
honour only drawings signed by both parties), the other party cannot succeed
in obtaining
a
declaration against the bank. The decision was doubted by
Dr. Goodhart in
68
L.Q.R.
(1952)
446, and by Professor Glanville Williams in
16
M.L.R.
(1953) 232.
An
appeal was settled
in
court
on
terms very
favourable to the innocent joint account holder: see
The
Times,
February
5,
1953,
and
a
second note by Dr. Goodhart in
69
L.Q.R.
(1953) 157.
See also Lord Chorley,
Law
of
Banking,
3rd ed.,
1950,
41
42
THE
MODERN
LAW REVIEW
VOL.
17
received his pass book
on
many occasions and could have detected
the forgeries at an early stage,
if
he had only taken the trouble to
examine his pass book.
As
a rule the forgeries are skilfully
executed: the usual method is to trace them from genuine signa-
tures. This means that they cannot possibly be detected in the
ordinary course of banking business. The aid of a microscope
or
photographic enlargements of the signatures are normally essential
in
order to determine whether the signatures are genuine
or
forged.
Bankers have not unnaturally asked themselves whether the
House of Lords would be likely to adopt the views of Hart quoted
above,
or
whether the House could be persuaded to lay down rules
similar to those enunciated by the Supreme Court of the United
States. The purpose of this article is to explore these questions.
I1
The leading case in support of Hart’s statement of the law is
Chatterton
v.
London and County Bank.5
A customer had had
his
pass book and paid cheques from his bank week by week, usually
fetching them himself. He went through the pass book, ticking
the debit items (which were called out to him from his ledger by
a
confidential clerk), and returned the book to the bank. After
about eleven months he discovered that twenty-five of these cheques
were not drawn by him, his signature having been forged by
his
clerk, and he claimed to have the sums in question credited to his
account. At the first trial, the jury came to the conclusion that
the cheques were not forged. However, the plaintiff persuaded the
Divisional Court to order a new trial, mainly
on
the ground that
the first trial was unsatisfactory. The bank appealed against this
decision to the Court
of
Appeal.
The court was composed of Lord Esher
M.R.
and Lindley and
Lopes
L.JJ.
The proceedings were brief. There were
no
lengthy
arguments as to the law.
No
formal judgment was delivered, the
bank’s appeal being simply dismissed. But Lord Esher let fall
some remarks which have had considerable influence upon this
aspect of the relationship between banker and customer. Lopes
L.J.
was more cautious in his approach to the problem. The
following is a verbatim egtract
:
Lord Esher.
Suppose [the customer] never looked at the pass
book
?
Lopes L.J.
What is the object of the book?
5
The first trial is reported in
The Miller
newspaper for May
5,
1890;
the
proceedings in the Divisional Court in the same newspaper for July
7,
1890,
and
in
The Times
for June
27, 1890;
the proceedings
in
the Court of Appeal,
in
The Miller
for November
3,
1890;
and the second trial in
The Miller
for
February
2,
1891,
and in
The
Times
for January
21, 1891.
See also Sir
John Paget’s Gilbart Lectures for
1903
published in the
Journal
of
the
Institute
of
Bankers,
Vol. XXIV; the same author’s
Law
of
Banking,
5th ed.,
(1947),
pp.
349-51;
and Lord Chorley and
P.
E.
Smart,
Leading Cases in the
LUW
of
Banking
(19531,
p.
141.
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