Savory (E. B.) & Company v Lloyds Bank Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Buckmaster,Lord Blanesburgh,Lord Warrington of Clyffe,Lord Russell of Killowen,Lord Wright |
| Judgment Date | 08 December 1932 |
| Judgment citation (vLex) | [1932] UKHL J1208-1 |
| Date | 08 December 1932 |
| Court | House of Lords |
[1932] UKHL J1208-1
House of Lords
Lord Buckmaster.
Lord Blanesburgh.
Lord Warrington of Clyffe.
Lord Russell of Killowen.
Lord Wright.
After hearing Counsel, as well on Friday the 28th and Monday the 31st, days of October last, as on Tuesday the 1st and Thursday the 3d, days of November last, upon the Petition and Appeal of Lloyds Bank, Limited, of 71, Lombard Street, in the City of London, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 22d of March 1932, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied, or altered, or that the Petitioners might have such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of E. B. Savory and Company, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 22d day of March 1932, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
The facts of this case are simple, but the problem to which they give rise is not easy of solution.
Two men, W. H. Perkins and D. C. Smith, were clerks of the Respondents, who are a firm of stockbrokers. Perkins had a banking account kept which he had opened at a branch of the Appellants' bank at Wallington on 6th September, 1923, and Smith's wife had an account, which had been opened on 27th November, 1926, with a branch at Red Hill, and transferred to Weybridge in February, 1927.
Between March, 1924, and November, 1926, Perkins stole from the Respondents 43 cheques, totalling in value £2,295. These cheques were all crossed bearer cheques in accordance with Rule No. 104 of the Stock Exchange, and were drawn by the Respondents in favour as to one of a man named Sly, as to another of a man named Frost, and as to the rest of a man named Davis. They were consequently negotiable instruments which needed no endorsement and passed from hand to hand. The one in favour of Sly was sent by Perkins by post to the credit of his account at the Wallington branch; the rest of the cheques were paid in either to the Appellants' Monument branch in London, or to their Thread-needle Street branch to the credit of Perkins' account at Wallington. The paying-in slip in each case purporting to be signed by Davis, excepting the one in favour of Frost and the one in favour of Sly, in which case the paying-in slip was signed by Perkins.
The claim in respect of the first 19 of these cheques amounting to ?780 11s. l0d. was admittedly barred by the Statute of Limitations. The judgment appealed from has excluded the claim to this extent.
Smith, between November, 1926, and March, 1930, stole 46 similar cheques totalling £3,717. One was in favour of Davis, and was paid into the Appellants' Threadneedle Street branch on a paying-in slip signed in the name of Davis; the rest were all payable in favour of one F. H. Gibbes, and these were all paid into the Appellants' Head Office, and in each a paying-in slip in the name of Gibbes. All the cheques were duly collected by the Appellants, and their proceeds placed as to the first set to the credit of Perkins at Wallington, and as to the others to the credit of Mrs. Smith at Red Hill or Weybridge.
The first of these cheques for £78 15s. was received before Mrs. Smith in fact became a customer and in respect of this there was no defence.
The Appellants claim repayment of the amounts of these cheques from the Bank, who rely in answer upon Section 82 of the Bills of Exchange Act, 1882, which is in the following terms:
Protection to collecting banker.
82. Where a banker in good faith and (without negligence) receives payment for a customer of a cheque crossed generally or specially to himself, and the customer has no title or a defective title thereto, the banker shall not incur any liability to the true owner of the cheque by reason only of having received such payment.
Apart from the section the Appellants' liability is clear, for they have converted the cheques which were stolen from the Appellants, and of which the Respondents were the true owners.
The question therefore is whether, in the circumstances, the Appellants received payment of the cheques without negligence, and the proof lies upon them. Roche J. held that the Appellants had discharged this burden, but his judgment was reversed by the Court of Appeal.
The risk of banking accounts being used for dishonest purposes is well known and realised by the banks. The Appellants have a book of rules designed to afford protection against this misuse of their facilities. Rules 29 and 36 are as follows:
29. No new current account shall be opened without knowledge of, or full enquiry into, the cirmcumstances and character of the customer.
36. No cheques or other documents made payable to a firm, company, or anyone in the capacity of a principal, should be accepted for credit of the private account of a partner, agent or clerk, or other person closely connected with the principal, or negotiated for such person, without the principal's written authority.
New Accounts. (See also Rules 231 to 255b.) Transactions with a partner, agent or clerk.
There is also a rule, not reduced into writing but said to be a well known banking understanding, familiar to cashiers from their ordinary experience, which is stated by the learned Judge who tried the case in terms, accepted by the Appellants, as follows:
"Banks do not take payments in, without enquiry, of cheques drawn by a firm in favour of a third party, and paid in by a person other than the payee who is known to be an employee of the drawing firm."
These rules and statements are not a legal measure of the liability of a bank. They may fall short, or they may exceed what the Courts may regard as their duty in a particular case, but they afford a very valuable criterion of obvious risks against which the banks think it is their duty to guard.
Now it appears that for many years there has been a practice among banks to receive cheques at one branch, which collects and transmits the proceeds to any defined credit at another branch. It was this practice of which Perkins and Smith availed themselves.
The evidence of the Appellants is that at their London branches they did not know Perkins or Smith, that they did not know the payees or the people who signed the paying-in slips, and the Appellants' accountant at first said that he did not know Messrs. Savory & Co., but this may have been due to a misunderstanding of the question for he modified this statement in subsequent answers.
Dealing for the moment with Perkins alone, it is obvious that if the Wallington Branch had known that Perkins was in the employment of Savory & Co., and that he was producing cheques for his own credit drawn by Savory & Co. in favour of third persons, they would at once have become suspicious and have made enquiries before they carried the proceeds of the cheque to the credit of his account. It is indeed because this happened in regard to just such a transaction with regard to Barclay's Bank that the whole fraud was exposed. With regard to the cheque paid in direct, the very situation contemplated by their own rule arose, to which the only suggested answer is that the signature of Savory & Co. might have been, though there is no proof whatever that it was, illegible.
If this be so, it follows that the system of receiving payments in by an unknown hand at another branch completely defeated the whole protection which the unwritten rule is designed to afford, for the branch that ultimately received the proceeds was only informed from the branch which collected the cheque by a slip that gives no information whatever as to the drawer's name or that of the payee of the cheque.
In other words, if the unwritten rule represents, as I think it does, some measure of their prudent course in conducting business then that prudence is completely neglected and ignored in cases where a branch, to which the customer is entirely strange, is used as a means of collecting the cheque.
That this arrangement of business is of great convenience both to the customers and the banks may be accepted, but, conducted as it was in the present case, it neglects the necessity for that care which I think the banks have themselves formulated in their unwritten rule. It is, however, urged that even at the Wallington branch no one would have known that Perkins was in fact an employee of Savory & Co., for, when the account was opened, though it was known that he was a stockbroker's clerk, no question had been asked as to who was the firm with which he was employed.
Mr. Trotter, the Appellants' witness, says that if a man were introduced to a bank manager as a stockbroker's clerk, the bank would get very little information without further enquiry. The following statement makes this plain:
Mr. SCHILLER: Would it tell the bank manager much if a man was introduced and he said: "I am a stockbroker's clerk"?—(A.) No, it would not.
(Q.) He would want to know the firm of stockbrokers he was clerk of?—(A.) Possibly he would not ask the clerk, but the individual introducing may say: "He is with so and so."
(Q.) But...
To continue reading
Request your trial
- Chartered Bank; Woodland Development Sdn Bhd v; PJTV & Densun (M) Sdn Bhd (Third party)
-
Nielsen Estate et al. v. Epton et al., 2006 ABQB 21
...4 D.L.R. 593; [1934] 3 W.W.R. 619; 1934 CarswellBC 78 (P.C.), refd to. [para. 612, footnote 107]. Lloyds Bank Ltd. v. Savory & Co., [1933] A.C. 201 (H.L.), refd to. [para. 613, footnote Crits et al. v. Sylvester et al. (1956), 1 D.L.R.(2d) 502; [1956] O.R. 132 (C.A.), affd. [1956] S.C.R......
-
ATTORNEY-GENERAL v Strathboss Kiwifruit Limited
...v Clarry M O’Byrne Ltd [1989] 1 NZLR 574 (HC) at 582; and Todd, above n 98, at [7.4.02]. See, for example, Lloyds Bank Ltd v Savory & Co [1933] AC 201 (HL); Edward Wong Finance Co Ltd v Johnson Stokes & Master [1984] AC 296 (PC); and Todd, above n 98, at High Court judgment, above n 2, at [......
-
Attorney-General v Strathboss Kiwifruit Ltd
...M O'Byrne Ltd [1989] 1 NZLR 574 (HC) at 582; and Todd, above n 98, at [7.4.02]. 339 See, for example, Lloyds Bank Ltd v Savory & Co [1933] AC 201 (HL); Edward Wong Finance Co Ltd v Johnson Stokes & Master [1984] AC 296 (PC); and Todd, above n 98, at 340 High Court judgment, above n 2, at [9......
-
Breaching the Accountability Firewall: Market Norms and the Reasonable Director
...City & Hackney Health Auth., [1998] A.C. 232 (H.L.) (U.K.). 141. Teff, supra note 135, at 480-81. 142. E.B. Savory v. Lloyds Bank Ltd., [1933] 1 A.C. 201 (H.L.) (U.K.); French v. Thames Valley Strategic Health Auth., [2005] EWHC (QB) 459 [112] (U.K.). 143. Hucks v. Cole, [1993] 1 Med L. Rev......
-
The viability of enforcement mechanisms under money laundering and anti‐terrorism offences in Malaysia. An overview
...supra n.46.36. Naylor supra n.6; Naylor supra n.3; Beare and Schneider, 2007 supra n.4.37. In force on the 1 May 2003.38. S3 AMLA.39. [1933] AC 201.40. S9 of AMLA.41. S2(1) of AMLA.42. s 7 of AMLA.43. S8 (3) (d).44. S 21(1)(c).45. BNM/GP9, p. 7.46. FATF Recommendation 12.47. S 13(1) AMLA.48......
-
Analyses: A New Mode of Forgery: The Rise of Cloned and Washed Cheques
...taken reasonable steps to ascertain the identity of its client upon the opening of a new account (see Lloyds Bank Ltd v EB Savory & Co [1933] AC 201 (HL); Powell v ABSA Bank supra; JT Pretorius ‘Professionele Aanspreeklikheid, die Invorderingsbank en Regshervorming’ (1987) 9 Modern Business......