Orbit Mining and Trading Company Ltd v Westminster Bank Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SELLERS,LORD JUSTICE DAVIES |
| Judgment Date | 30 July 1962 |
| Judgment citation (vLex) | [1962] EWCA Civ J0730-1 |
| Date | 30 July 1962 |
| Court | Court of Appeal |
[1962] EWCA Civ J0730-1
In The Supreme Court of Judicature
Court of Appeal
(From: Mr. Justice MacKehna)
Lord Justice Sellers
Lord Justiustice Harman and
Lord Justice Davies
Mr. R. J. PARKER. Q. C. and Mr. RICHARD YORDE (instructed by Messrs Waltons, Bright & Co.) appeared on behalf of the Appellants (Defendants).
Mr. PAUL SIEGHART and Mr. PHILIP LEWIS (instructed by Messrs C. G. Metson & Co.) appeared on behalf of the Respondents (Plaintiffs).
This is an appeal by the Westminster Bank Limited from a judgment of Mr. Justice MacKenna holding the Bank liable to pay the plaintiffs the sum of 21,032. 18s. 6d.
This total sum was collected by the Bank through the clearing house from the Midland Bank Limited, with whom Orbit had an account at their Bishopsgate branch, and was credited to the account of one Epstein who was a customer of the defendant bank at their Chancery Lane and Holborn branch. Epstein was not entitled to the money. It was collected on three instruments: the first was dated the 9th August, 1957, and was for 147. 12s. Od., the second was dated the 15th August, 1958, and was for £1,269. 18s. 6d., and the third was dated the 2nd October, 1958, and was for £415. 8s. Od. It was conceded at the trial that the Bank had converted these instruments but they contested liability on the ground of the statutory protection given to them as a collecting bank acting (as they alleged they were) in good faith and without negligence by section 82 of the Bills of Exchange Act, 1882, and section 17 of the Revenue Act, 1883, and since 17th October, 1957 (that is in respect of the last two transactions) by similar provisions of the Cheques Act, 1957, section 4, which replaced the earlier provisions which the Act repealed. The Bank also relied at the trial on estoppel and ratification but only estoppel was pursued before us.
It has been necessary to refer to "instruments" as it has been the plaintiffs' contention that the pieces of paper by which these sums of money were obtained were not cheques or similar instruments to which the statutory protection applied and therefore the protection was not open to the Bank by way of defence even if the statutory requirements could otherwise have been established. To meet this position or their failure under the statutes, should it arise, the Bank relied on estoppel.
The amounts were all drawn on cheque forms of a business size, it was said, rather larger than the usual private cheque, and these would normally be described as cheques, as they were inthe course of the argument and in the judgment.
The three issues which arise for determination on the appeal and the cross-appeal are:(1) Were the instruments within those to which the statutory protection applied so that the Bank could invoke the protecting provisions? (8) If so, has the Bank established that it acted without negligence in respect of the three transactions? It was clear and unquestioned that it acted in good faith. (3) Alternatively does an estoppel arise in favour of the Bank assuming that the Bank failed on either issue (l) or (2)?
The judgment provides a clear statement of the facts which I need not re-state in so far as they deal with the early history of Epstein and Orbit but would briefly summarise.
Epstein had been a customer of the Bank since 1950 and no one suggests that the account was not properly opened by the Bank and properly operated up to these transactions by Epstein. When Epstein was taken into the employment of Commercial Metal Company Limited in November, 1950, he informed the Bank and gave his address as care of that company. When Commercial changed their address to 12/20 Camomile Street, London, E. C.3, the Bank was informed and recorded the new address. A Mr. Wolff was the General Manager of Commercial and he and Epstein became associated in selling manganese are on behalf of some Greeks, who paid Commercial a commission on sales. In 1956 the Greeks acquired the shares of Orbit, an English company, so that Orbit should sell the are which Commercial would buy from the Greeks at the selling price obtained by Orbit less 4 per cent. and that this commission should be equally divided between Orbit and Commercial, thereby giving the Greeks, who mined and shipped the ore, a half share of the profit on such sales.
On the 5th October, 1956, Mr. Wolff and Epstein weref appointed directors of Orbit and Epstein was made Secretary. Orbit opened a banking account at the Midland Bank's Bishopsgate branch and it was arranged that Orbit's cheques ahould be signed by any two directors and accordingly Mr. Wolff and Epstein wereempowered to sign cheques for Orbit which the Bank would honour. Orbit's business of selling the are was done at Commercial's offices. Orbit had no separate staff and it was Epstein's duty to keep its books and to prepare their accounts.
Mr. Wolff on occasions went abroad for business or holidays and was abroad in 1957 and 1958. In these years before going abroad, at the request of Epstein, he signed a few cheque forms in blank so that payments might be made far Orbit's trading purposes. Epstein was regarded by Commercial and Orbit as a good and honest servant; he had been made a director of Orbit and was trusted by Mr. Wolff. The Bank regarded him as a satisfactory customer. It had no knowledge of Orbit as a company or of Epstein's association with it as a director. The address the Bank had of care of Commercial was adequate to enable communications to reach Epstein but it seems odd perhaps that Epstein did not inform the Bank of his directorship and association with Orbit as it was a superior position to that of technical manager, as he had described himself on opening the account.
The three cheques were before the court and each was described in detail in the judgment. Each reads "Pay Cash or Order" and below the statement of the amount there is a stamped imprint "for and on behalf of Orbit Mining & Trading Co. Ltd", under which appeal's the signature of Mr. Wolff and below that the signature of Epstein. On the first cheque the word "Director" is stamped between the two signatures, that is immediately below the signature of Mr. Wolff, but the word is omitted from the other two. Each cheque is crossed generally and each is endorsed with Epstein's signature on the back. The first and third cheques are stamped with the Bank's Chancery Lane and Holborn branch's stamp, at which branch they were paid in, but the second, by far the largest in amount, was paid in at the Bank's Bishopsgate branch and is stamped accordingly. All three cheques have the Midland Bank's "Paid" stamp upon them, in which is inset the date of payment.
A credit or paying-in slip had been used when the cheques were handed in for collection and each slip bore the name "A. F. Epstein" in capital letters, and in respect of the second cheque paid in at the Bank's Bishopsgate branch the appropriate form was used directing credit to Epstein's account at Chancery Lane and Holborn branch
Epstein's signatures on the face of each cheque and on it back might be read as the signature of the same person but to the uninformed, or, as the learned judge says, to the untrained eye, the signature is illegible. It would not in itself reveal one of the drawers or the indorser to be the A. F. Epstein whose 8 name was on the paying-in slip and who was the customer at the Bank's Chancery Lane and Holborn branch.
It appears beyond question that Epstein had used three of the cheques signed by Mr. Wolff in blank and filled them in, without authority, in the way described, and dishonestly obtained credit for the amounts stated to his own account.
This brief recital of the facta, more fully set out in the judgment, is I think sufficient to enable the issues to be considered.
It will be convenient to refer to the Cheques Act, 1957, only, although the first transaction arose before that Act came into force and became a substitute for the earlier provisions. Section 4, as far as is relevant, is as follows: "(l) Where a banker, in good faith and without negligence, (a) receives payment for a customer of an instrument to which this section applies….and the customer has no title for a defective title, to the instrument, the banker does not incur any liability to the true-owner of the instrument by reason only of having received payment thereof. (2) This section applies to the following instruments, namely, (a) cheques; (b) any document issued by a customer of a banker which, though not a bill of exchange, is intended to enable a person to obtain payment from that banker of the sum mentioned in the document".
Section 5 provides: "The provisions of the Bills ofExchange Act, 1882, relating to crossed cheques shall, so far as applicable, have effect in relation to instruments (other than cheques) to which the last foregoing section applies as they have effect in relation to cheques".
On the first issue the judgment holds that the three instruments are not cheques but that they are documents which comply with (2) (b) above and therefore the Bank is entitled to rely on the provisions of section 4 (l). This finding if upheld is sufficient for the Bank but it has been argued in answer to the cross-appeal that if, as the respondents submit, the learned judge was wrong, the instruments should be held to be cheques.
By section 6 of the Cheques Act, 1957, the Act has to be construed as one with the Bills of Exchange Act, 1882. Section 73 of that Act provides that "a cheque is a bill of exchange drawn on a banker payable on demand". Section 3 sub-section 1 provides: "A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person...
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