Thomson v Clydesdale Bank Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 26 June 1893 |
| Date | 26 June 1893 |
| Docket Number | No. 12. |
| Court | House of Lords |
Ld. Chancellor (Herschell), Lord Watson, Lord Morris, Lord Shand.
Bank—Stock Exchange—Fraud.—
A stockbroker, whose bank account was overdrawn, paid into it a sum of money by indorsing a cheque received by him from another broker, to whom he had sold certain shares, on instructions from a body of trustees to sell and invest the price on deposit with certain colonial banks. The ordinary course of business on the stock exchange is that the selling broker receives the buying broker's cheque, and makes payment to his own customer by his own cheque, or, where he has instructions to re-invest, by delivery of the new investments. The sum paid by the broker into his account did not extinguish the overdraft. The broker made no re-investment for the trustees, and within a few days absconded without having further operated on his bank account to any substantial extent. The trustees sued the bank for the sum paid in. The bank officials deponed that they believed the money to have come into the broker's hands in the course of his business as a broker, and there was no evidence that the bank knew that the broker had improperly paid the money into his bank account.
Held (aff. judgment of the Second Division) that the bank was not bound to repay the money to the trustees.
(In the Court of Session, March 19, 1891, 18 R. 751.)
Mr J. R. Thomson and Others, Dunlop's Trustees, appealed.
Lord Chancellor.—The appellants in this case are the trustees of the late Thomas Dunlop. They held fifty shares in the Commercial Bank of Scotland, which they resolved to sell with a view to another investment. They accordingly, in February 1890, instructed Mr D. B. Thomson, a stockbroker in Edinburgh, to sell the shares and to deposit the proceeds in certain colonial banks in the names of the appellants. The shares were sold by Mr Thomson, and the sum realised was paid in by him to his account with the respondent bank. The transaction was carried out in the ordinary way by Mr Thomson, the dealing being between him and another member of the stock exchange who knew him only in the transaction, and accordingly gave in payment for the shares a cheque payable to Mr Thomson or order. This cheque was paid in by Mr Thomson to the Clydesdale Bank. At the time when the cheque was paid in, Mr Thomson's account with the Clydesdale Bank was overdrawn to an amount exceeding the amount so paid. Some few days afterwards Mr Thomson absconded, and application was then, or shortly afterwards, made by the appellants for the payment to them by the Clydesdale Bank of the sum of money which they had so received from Mr Thomson. After the date of the receipt of that cheque some small sums were drawn upon his account by Mr Thomson, but the amount so drawn was greatly less than the sum paid to his account in the manner which I have described to your Lordships. The question is whether under these circumstances the appellants are entitled to follow, as it is called, this sum of money, and to require its payment to them by the Clydesdale Bank, or whether the Clydesdale Bank are entitled to retain it in discharge pro tanto of the debt which was due from Mr Thomson.
It cannot, I think, be questioned that under ordinary circumstances a person, be he banker or other, who takes money from his debtor in discharge of a debt is not bound to inquire into the manner in which the person so paying the debt acquired the money with which he pays it. However that money may have been acquired by the person making the payment, the person taking that payment is entitled to retain it in discharge of the debt which is due to him. But it is said that in the present case the bankers took with notice that the sum which they received was a sum of money not belonging to their debtor personally, but which he held or had received for other persons, and that, having had this knowledge or notice, they are not entitled to retain it in discharge of Mr Thomson's debt. My Lords, I cannot assent to the proposition that even if a person receiving money knows that such money has been received by the person paying it to him on account of other persons, that of itself is sufficient to prevent the payment being a good payment and properly discharging the debt due to the person who receives the money. No doubt if the person receiving the money has reason to believe that the payment is being made in fraud of a third person, and that the person making the payment is handing over in discharge of his debt money which he has no right to hand over, then the person taking such payment would not be entitled to retain the money, upon ordinary principles which I need not dwell upon. But in the present case there appears to me to be an absolute absence of any evidence of that kind. Reliance is entirely placed, on behalf of the appellants, upon the answers given by the manager of the bank, which were in these terms:—‘I made no inquiry as to whether the money paid in to Mr Thomson's account was in his hands as broker or otherwise. I believed that it was in his hands as broker acting for clients. (Q.) And that, I suppose, would be your belief generally when he made payments into his account of a large amount? (A.) Yes. (Q.) Did you know whether or not Mr Thomson was engaged in a speculative account of his own? (A.) I had not the least knowledge. (Q.) For anything you knew, the cheques may have been paid in for dealings in which he was principal? (A.) We believed that the cheques were just paid in in the ordinary course of business. (Q.) As money belonging to him or at his disposal? (A.) Yes.’
Now, that is the whole of the evidence upon which reliance is placed; and it seems to me that, so far from...
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Table of cases
...234 Thomas v. Howell (1874), L.R. 18 Eq. 198.......................................................... 200 Thomson v. Clydesdale Bank, [1893] A.C. 282 (H.L.) ....................................... 227 Thomson v. Stikeman (1913), 17 D.L.R. 205 (Ont. C.A.) .........................................