Slingsby v District Bank Ltd
| Jurisdiction | England & Wales |
| Year | 1931 |
| Date | 1932 |
| Court | Court of Appeal |
Banker and Customer - Cheque - Description of Payee - “A. B. per C. D.” - Indorsement - Blank Space - Forgery - Duty of Drawer - Negligence - Estoppel - Ostensible Agency -
The plaintiffs, executors of a will, kept an executors' account with the defendants, and retained a firm of solicitors, Messrs. C. & P., who used to assist them in matters connected with their testator's estate. The acting member of the firm was one J. C. The plaintiffs in conference with J. C. decided to invest through Messrs. J. P. & Co., stockbrokers, a sum of 5000l. part of the estate lodged on deposit with the defendants. J. C. accordingly drew out a form of cheque for signature by the plaintiffs. It was in the form “Pay J. P. & Co. or order” and was drawn on the plaintiffs' deposit account with the defendants. The cheque was signed by the plaintiffs and left with J. C. to be posted to J. P. & Co. with instructions to invest the money. J. C., instead of posting the cheque to J. P. & Co., fraudulently inserted the words “per C. & P.” in the blank space between the payees' name and the words “or order”; he then indorsed the document with the names C. & P. and paid it so altered and indorsed into the W. Bank to the credit of a company in which he was interested and which had an account at that bank. The document was accepted without question by the W. Bank and passed through the clearing house, and the account of the plaintiffs with the defendants was debited, and that of the company with the W. Bank was credited, with the amount on the face of the document. In an action by the plaintiffs against the defendants for conversion, negligence and breach of duty:—
Held, (1.) that the cheque had been “materially altered” within the meaning of s. 64 of the Bills of Exchange Act, 1882, and was avoided as between the plaintiffs and defendants by that section, and that therefore the defendants could not rely upon s. 60 of the Act as excusing them for paying the cheque.
(2.) That for the same reason the defendants could not rely on s. 80 of the Act.
(3.) That assuming the description of the payees, “J. P. & Co. per C. & P.” to be a recognized although unusual description, the indorsement of “C. & P.” without any reference to “J. P. & Co.” was irregular and invalid, and that the defendants were negligent in honouring the cheque, and for this reason also were not protected by s. 80, or semble by s. 60 of the Act.
(4.) The additions and alterations referred to in the proviso to sub-s. 2 of s. 79 of the Act are additions to and alterations in the original crossing of a crossed cheque and not to or in the body of a cheque.
(5.) That in leaving a blank space between the names of the payees and the words “or order” the plaintiffs were not guilty of any breach of duty towards the defendants.
(6.) That the plaintiffs had not held out J. C. as having authority to draw cheques on their behalf so as to estop them from asserting the fact that a document drawn by him and purporting to be a cheque signed by them had been materially altered by him after signature without their authority and was a forgery.
APPEAL from the judgment of Wright J.F1 in an action tried before the learned judge without a jury.
The plaintiffs were executors of the will of one Harry Turner deceased. They kept an executors' account with the defendants' Macclesfield Branch, and employed in relation to the testator's estate a firm of solicitors, Messrs. Cumberbirch & Potts, of Macclesfield, of whom the acting partner was James Cumberbirch, a man of good repute in his profession. At a meeting on December 4, 1929, at which J. Cumberbirch was present, the plaintiffs decided to invest a sum of 5000l., part of the estate, through a firm of London stockbrokers, John Prust & Co., to whom J. Cumberbirch was to give the necessary instructions for the purchase of Five per cent. War Loan, 1929–1947. In pursuance of this intention J. Cumberbirch drew out a cheque in the following form:—
“No. S412626. |
Macclesfield, 4th December, 1929. District Bank, Limited. Macclesfield. |
(In print) Pay (in writing) John Prust & Co. (in print) or Order (in writing) Five thousand pounds------ |
A/c Executors of Harry Turner. |
5000l.------- |
|
Deposit a/c.”F2 |
This form was signed by three of the executors on December 4 and by Mrs. Slingsby, the fourth and last, on December 5. Then on the same day, instead of posting the cheque, so drawn and signed, to John Prust & Co., Cumberbirch without the authority, assent, or knowledge of any of the executors, altered the cheque by writing in the blank space between “& Co.” and “or order” the words “per Cumberbirch & Potts.”
Cumberbirch was the chairman of the Palatine Industrial Finance Co., Ld., a company which had an account with a Manchester branch of the Westminster Bank. The company's account was on the morning of December 5 in credit to the amount of 49l. On the same day Cumberbirch indorsed the executors' cheque “Cumberbirch & Potts” and took it to the Westminster Bank. There he made out a paying in slip instructing the bank to pay the 5000l. to the account of the Palatine Industrial Finance Co. and handed the cheque and the paying in slip to a cashier. On December 5 and 6 cheques were drawn on this account to the amount of 565l. and were honoured. The executors' cheque in due course passed through the Manchester clearing house. On December 7 the account of the Palatine Industrial Finance Co. with the Westminster Bank was credited with 5000l., and the plaintiffs' account with the defendants was debited with the same amount. Soon after this Cumberbirch absconded. In March, 1930, his dishonesty was discovered. In May, 1930, the plaintiffs brought the action to recover the 5000l. wrongfully debited to their account as aforesaid.
The pleadings are very fully stated in the report in the Court below. Briefly the plaintiffs alleged that their account had been debited without authority in that there was no proper or regular indorsement of the cheque and that the cheque had been materially altered without their assent and was therefore void by s. 64 of the Bills of Exchange Act, 1882. Alternatively they relied on a conversion of 5000l., and in the further alternative claimed damages for the negligence and breach of duty of the defendants in paying the so-called cheque without inquiry notwithstanding that it did not appear to be indorsed by the payees therein named.
The defendants denied that the words had been added unlawfully or that the addition was a material alteration of the cheque or that the indorsement was unlawful or irregular or made without authority; and they asserted that they had debited the plaintiffs' account in good faith and without negligence and with the authority of the plaintiffs. They also alleged that if any of the irregularities complained of had taken place they were due to the negligence of the plaintiffs themselves in allowing Cumberbirch to draw the cheque and in signing it leaving the blank above mentioned and then permitting Cumberbirch to retain it in his custody, and that these acts of the plaintiffs estopped them from denying that the cheque was their mandate on which the defendants were bound or entitled to act. They further contended that the loss of the sum claimed was due to the fraud of Cumberbirch, the servant or agent of the plaintiffs, for whose acts the defendants were in no way responsible; and lastly they relied upon ss. 60 and 80 of the Bills of Exchange Act, 1882.F3
At the trial the defendants called several witnesses of long experience in the practice of banking, who said that cheques drawn in the form “Pay A. per B.” were well-known, but not common; that cheques in this form were used when payments were being made (a) by tax-payers to the Income Tax Commissioners through the collector of taxes, (b) by ratepayers to the rating authority through a rate collector, (c) by a charterer to a shipowner through the ship's agent, (d) by joint stock companies paying dividends to holders of stock or shares through their bankers, and (e) by a purchaser of real property paying the purchase money to the vendors through their solicitors. These witnesses further stated that in their opinion cheques in this form were properly and regularly indorsed in the name of B. without any reference to A. In cross-examination the attention of these witnesses was called to a volume published by the Institute of Bankers with the authority of the Council of the Institute under the title, Questions on Banking Practice, 8th ed. (1930). The following questions and answers were particularly put to the witnesses:—
Questions on Banking Practice, 8th ed. (1930), Question
“751. A cheque is drawn payable to ‘John Jones a/c A. B.,’ and endorsed ‘John Jones.’ Is such endorsement sufficient? Answer: No; it should state that it is an account of A. B.
“752. A cheque payable to the Greenfield Colliery Company, Ld., per John Jones, Esq., is endorsed ‘John Jones.’ Is this a sufficient discharge as far as the paying banker is concerned? Answer: No, John Jones should state that he signs on behalf of the Greenfield Colliery Company. (But see 754.)
“753. A cheque is drawn payable to ‘The Overseers of Knightsbridge, per A. Procter.’ It is endorsed ‘A. Procter.’ Is this endorsement strictly correct? Answer: No; A. Procter should state that he signs on behalf of the overseers of Knightsbridge. (But see 754.)
“754. A cheque is presented payable...
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