United Australia Ltd v Barclays Bank Ltd

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeThe Lord Chancellor,Lord Atkin,Lord Thankerton,Lord Romer,Lord Porter
Judgment Date20 Aug 1940
Judgment citation (vLex)[1940] UKHL J0820-2

[1940] UKHL J0820-2

House of Lords

Lord Chancellor

Lord Atkin

Lord Thankerton

Lord Romer

Lord Porter

United Australia Limited (in Liquidation)
and
Barclays Bank, Limited.

After hearing Counsel, as well on Tuesday the 28th and Wednesday the 29th, days of May last, as on Monday the 3d day of June last, upon the Petition and Appeal of United Australia, Limited (in liquidation) whose registered office is at 55 Broad Street Avenue, 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 23d of February 1939, 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 Barclays Bank, Limited, 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 23d day of February 1939, complained of in the said Appeal, be, and the same is hereby, Reversed, and that Judgment be entered for the Appellants for the sum of One thousand nine hundred pounds (£1,900) with interest at the rate of four per centum per annum as from the 12th day of November 1934: And it is further Ordered, That the Respondents do pay, or cause to be paid, to the said Appellants the Costs incurred by them in the Courts below, and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the King's Bench Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

The Lord Chancellor
1

My Lords:

2

The Appellant company was the plaintiff in an action brought against the Respondent bank in the following circumstances. A company called Lower Ancobra (Gold Coast) Areas Limited owed the Appellants a sum of £1,900, and in payment drew a cheque for that amount making it payable to the Appellant company or order. The Appellant company had a secretary named Emons, who had authority to endorse cheques for the purpose of paying them into the Appellant company's bank account, but had no authority to endorse cheques specially on behalf of the Appellant company for the purpose of enabling payment to be made to a third party. Emons, purporting to act on the Appellant company's behalf, specially endorsed the cheque so as to make it payable to the M.F.G. Trust Limited (hereinafter called M.F.G.), of which Emons was a director. Thereupon M.F.G. endorsed the cheque and paid it into its account at the Respondent bank. The Respondent bank knew that Emons, besides being secretary of the Appellant company, was a director of M.F.G., but without making any enquiries the bank collected the proceeds of the cheque and placed them to the credit of M.F.G.'s account.

3

By writ issued on November 8th, 1937, the Appellant company sued the Respondent bank for (1) damages for conversion; (2) alternatively, damages for negligence; (3), in the further alternative, for £1,900 as money had and received by the Defendants to the use of the Plaintiffs. The Respondent bank in its Defence claimed to be protected from liability by Section 82 of the Bills of Exchange Act, 1882, but it did not attempt at the trial to establish that defence and it became common ground that the circumstances in which the Respondent bank had dealt with the cheque were such as would make it liable to the Appellant company for the £1,900, unless it was relieved from liability in consequence of earlier proceedings taken by the Appellant company in an endeavour to recover the £1,900 from M.F.G. The nature and course of these earlier proceedings must now be stated.

4

It was not till some time after the misapplication of the cheque that the Appellant company discovered anything about it. Neither the receipt of the £1,900, nor the paying away of that amount, was reported to the Board. Nothing relating to the transaction was to be found in the books of the company until Emons subsequently told the accountants, who were writing up the Appellant company's books, to make entries showing under date November 12th, 1934, the receipt of £1,900 from Lower Ancobra (Gold Coast) Areas Limited and a contemporaneous loan of the same amount to M.F.G. On May 13th, 1935, the Appellant company issued a writ against M.F.G. claiming the £1,900 as "money lent", or alternatively as "money had and received" by M.F.G. to the use of the Appellant company. It will be observed that the Appellant company at the time had no knowledge of the cheque, or of how any such cheque had been dealt with by the Respondent bank. On May 22nd, 1935, the Appellant company signed judgment against M.F.G. in default of appearance, but the judgment was shortly afterwards set aside on the application of M.F.G. In support of this application Emons made an affidavit on behalf of M.F.G. and swore that the money was not lent by the Appellant company to M.F.G., and that M.F.G. did not receive it for the use of the Appellant company. The defence delivered by M.F.G. repeated these statements. On October 28th, 1935, on the petition of another creditor, a winding-up order was made against M.F.G. The action by the Appellant company against M.F.G. was thereupon automatically stayed before trial and no judgment was ever obtained. On December 10th, 1935, the Appellant company signed an affidavit of proof of debt in the liquidation of M.F.G. stating that M.F.G. was indebted to the amount of £1,900 to the Appellant company for money lent or money had and received, but this proof was never admitted. There was thus never any recovery, either by judgment or otherwise, of any part of the sum claimed from M.F.G.

5

In the course of the proceedings against M.F.G., the Appellant company learned that a cheque for £1,900 had been endorsed over by Emons to M.F.G., and in June, 1935, they obtained a copy of the cheque which showed that it had been cleared through the Respondent bank. Hence the present action.

6

The question to be decided in this Appeal is whether the proceedings against M.F.G., carried on up to the point that they in fact reached, constitute a valid ground of defence for the Respondent bank and so relieve it in the present action from a liability, which would otherwise certainly attach to it, to repay to the Appellant company the sum of £1,900, of which they have been deprived and which they have not received from any other source.

7

The view taken by the Courts below is that the Appellant company, by bringing their action against M.F.G., elected to "waive the tort" and thereby became irrevocably committed, even against a different defendant, to the view that Emons was, as he professed to be, duty authorised as the Appellant company's agent to deal with the cheque as he did. If so, the Bank's dealing with the cheque was not tortious and the present action would fail.

8

Mr. Justice Goddard (as he then was), who tried the action, was conscious that such a conclusion might seem, as a matter of justice and common sense, difficult to accept, for he said:

"It is not easy to see why this act of suing the M.F.G. Trust for the money lent should enure to the benefit of the Bank, who were not parties to that action and who in no way altered their position in consequence of any action which United Australia took in suing the M.F.G. Trust; but it seems to me that I have no option but to hold that the action of so doing does free the Bank, because now it cannot be said that the dealing in the cheque was tortious, and if the dealing in the cheque was not tortious, if it was not conversion, then the Bank cannot be guilty of any wrong in the matter."

9

It was thus the issue of the writ against M.F.G. which the learned Judge regarded as sufficient to provide the Bank with a valid defence.

10

Lord Justice Clauson, who delivered the judgment of the Court of Appeal, followed a similar line of reasoning. He said:

"The claim for money lent involved the position that there had never been any tort at all, but that the £1,900, in the form of a cheque specially endorsed to M.F.G., had been properly passed by Emons to M.F.G. by way of loan. The claim for money had and received did, however, involve the position that there had been a tortious acquisition of the money by M.F.G., but also involved a waiver of the tort, and an election to claim against the Defendants (the M.F.G. Trust) in ' assumpsit', i.e., on the footing of a quasi contractual liability to refund."

11

Thus the Court of Appeal also regarded the initiation of the action against M.F.G. as a conclusive election which prevented the Appellants thereafter alleging that the Bank converted the cheque.

12

The House has now to decide whether the Courts below are right in holding that the Appellants are barred from recovering judgment against the Bank because they previously instituted proceedings, on the basis of "waiving the tort", against M.F.G., when those proceedings never produced any judgment or satisfaction in the Plaintiff's favour. This question may be conveniently dissected by first asking whether there would be any such bar even if the present action was an action in tort against M.F.G. If a remedy in tort would remain open against the same Defendant, then there certainly cannot have been any conclusive election which could prevent an action against a different Defendant who had previously not been sued at all.

13

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