Westminster Bank Ltd v Zang
| Jurisdiction | England & Wales |
| Judge | Viscount Dilhorne,Lord Reid,Lord Hodson,Lord Upjohn,Lord Wilberforce |
| Judgment Date | 15 December 1965 |
| Judgment citation (vLex) | [1965] UKHL J1215-5 |
| Date | 15 December 1965 |
| Court | House of Lords |
[1965] UKHL J1215-5
Viscount Dilhorne
Lord Reid
Lord Hodson
Lord Upjohn
Lord Wilberforce
House of Lords
Upon Report from the Appellate Committee, to whom was referred the Cause Westminster Bank Limited against Zang, that the Committee had heard Counsel, as well on Wednesday the 27th and Thursday the 28th, days of October last, as on Monday the 1st day of November last, upon the Petition and Appeal of Westminster Bank Limited, whose registered office is at 41 Lothbury, in the City of London, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 17th of February 1965, might be reviewed before Her Majesty the Queen, in Her 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 Her Majesty the Queen, in Her Court of Parliament, might seem meet; 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 Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 17th day of February 1965, 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 Respondent the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
In 1962 during the weekend of Easter Mr. J. Tilley gave to the Respondent Zang £1,000 in cash in exchange for a cheque for £1,000 drawn by the Respondent and made payable to "J. Tilley or Order".
The £1,000 which Mr. Tilley gave to the Respondent was the property of Tilley Autos, Ltd., a company controlled by Mr. Tilley and of which he was the managing director.
On the 27th April, 1962, Mr. Tilley went to his Bank, the Euston Road branch of the Appellants, and filled in a paying-in slip. On that slip he wrote that the account to be credited was that of Tilley Autos, Ltd., and the cheques he paid in and entered on the paying-in slip included the cheque he had received from the Respondent. The other cheques he paid in had been drawn payable to Tilley Autos, Ltd. Mr. Tilley did not indorse the Respondent's cheque before paying it in.
On the paying-in slip were printed the following words:
"The Bank reserves the right, at its discretion, to postpone payment of Cheques drawn against uncleared effects which may have been credited to the Account."
The cheque for £1,000 drawn by the Respondent was presented to his Bank for payment three times. The first time it was returned marked "Please re-present". On the second and third occasions it was returned marked "Refer to drawer".
Mr. Tilley decided to sue the Respondent and on the 11th January, 1963, his solicitors wrote to the Appellants asking the Bank to let them have the dishonoured cheque on their undertaking to return it on demand. On the 18th January, 1963, the Bank sent them the cheque.
On the 6th February, 1963, Mr. Tilley issued a writ against the Respondent claiming the £1,000 due on the dishonoured cheque. This action was eventually dismissed as a result of Mr. Tilley's failure to comply with an order for discovery.
On the 13th September, 1963, the cheque was returned to the Bank at their request and on the 11th December, 1963, the Appellants issued a writ against the Respondent as holders in due course or for value of the cheque.
"Holder" is defined by section 2 of the Bills of Exchange Act, 1882, as meaning "the payee or indorsee of a bill or note who is in possession of it, or the bearer thereof". As the Appellants had received the cheque from Mr. Tilley without indorsement by him, they did not become holders of the cheque within the meaning of section 2 of the Bills of Exchange Act, 1882.
In 1957 the Cheques Act was passed with the object of reducing the labour involved and the time taken by collecting and paying banks in ensuring not only that each cheque was indorsed but also that the indorsement corresponded with the name of the payee on the face of the cheque.
Section 2 deals with the rights of collecting banks in respect of cheques not indorsed by holders and reads as follows:
"A banker who gives value for or has a lien on, a cheque payable to order which the holder delivers to him for collection without indorsing it, has such (if any) rights as he would have had if, upon delivery, the holder had indorsed it in blank."
The Appellants relied upon this section and sought to establish (1) that the holder had delivered the cheque to them, (2) that it had been delivered to them for collection and (3) that they had given value for it or had a lien upon it.
The Respondent, in addition to pleading the Gaming Act and denying that the Appellants had any right to sue on the cheque, pleaded that by delivering the cheque to Mr. Tilley's solicitors, the Appellants had lost any rights they had to sue on it.
The action was tried by Roskill, J., who held that the Gaming Act plea failed. He gave judgment for the Appellants for £1,000 and £75 interest. The Respondent appealed to the Court of Appeal (Lord Denning, M.R., Danckwerts, L.J., and Salmon, L.J.). The Gaming Act plea was not pursued nor was the Appellants' claim to have a lien on the cheque. The Court of Appeal allowed the appeal.
The issues for your Lordships' determination were whether the Bank had established the matters necessary for them to avail themselves of section 2 of the Cheques Act and whether, if they had any rights in relation to the cheque by virtue of that section, they had lost them by delivery of the cheque to Mr. Tilley's solicitors.
The first question, namely, whether the holder of the cheque had delivered it to the Bank was answered by the Court of Appeal in the affirmative. In my opinion, it is clear that Mr. Tilley was, when he delivered the cheque to the Bank, the holder of it within the meaning of section 2 of the Bills of Exchange Act, 1882.
Much argument was directed to the second question, namely, was the cheque delivered to the Bank for collection. It was argued for the Respondent that "collection" in section 2 of the Cheques Act was to be interpreted as meaning collection for payment into the payee's account when the payee is named on the cheque; and that as the Appellants had received the cheque unindorsed with the direction that it was to be paid into the account of Tilleys Autos, Ltd., they could not rely upon section 2.
This argument found favour with Lord Denning. He held that a banker who receives a cheque for collection only has the right conferred by section 2 when the cheque is to be credited for the account of the payee. Lord Justice Salmon, on the other hand, found it impossible to give the words "for collection" in section 2 the restricted meaning for which the Respondents contended.
Production of a paid cheque indorsed by the payee is very strong evidence of receipt by the payee. By dispensing with the requirement of indorsement on all "order" cheques, the Cheques Act deprived the drawer of ability to establish receipt by the payee in this way. He might, it is true, be able to secure evidence from the payee's bank if it had been credited to the payee's account, but if it was credited to the account of some other person it appears that it would be very difficult, if not impossible, for the drawer to establish into whose account it had gone and that it had been credited to that account on the instructions of the payee.
So if "collection" in section 2 is confined to meaning collection for the payee's account only, the drawer of the cheque not indorsed by the payee may still be able to prove receipt by the payee.
It can safely be assumed that it was not the intention of Parliament, when providing for relief from the need for indorsement, materially to prejudice the position and rights of the collecting and paying banks and of drawers of cheques. Section 1 provides protection for the paying banks. If the prescribed conditions are satisfied, section 2 gives the collecting banks the same rights in respect of an unindorsed cheque as in respect of an indorsed one. Section 4 provides protection for collecting banks and section 3 gives some protection to the drawer.
That section provides that an unindorsed cheque which appears to have been paid by the banker on whom it is drawn is evidence of the receipt by the payee of the sum payable by the cheque.
The acceptance of a paid unindorsed cheque as evidence of its receipt by the payee of the sum payable by the cheque does not appear to be as cogent evidence of receipt by the payee as production of a paid cheque indorsed by him. But this is, in my opinion, no ground on which one would be entitled to...
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Table of cases
...Westminster Bank Ltd. v. Hilton (1926), 136 L.T. 315 (H.L.) ............................ 292 Westminster Bank Ltd. v. Zang, [1966] A.C. 182 (H.L.) .............................273, 311 Wheatland Investments Ltd. v. Sask Tel (1994), 126 Sask. R. 226, [1995] 1 W.W.R. 671, [1994] S.J. No. 558 ......