aspects]
BANKING
clerk obtained from the banker and appropriated. The court held that the bank were entitled to debit the account with the larger sum. The reasons assigned by the different judges were various and somewhat obscure, and probably no case has ever been so much discussed, doubted, and even dissented from as this one, which Lord Esher once described as “the fount of bad argument.” The most recent criticisms upon it appear in the case of Scholfield v. Lord Londesborough, 1896, A. C. 514. There the House of Lords held that there ivas no duty on the part of the acceptor of a bill towards the possible holder binding him to take precautions against fraud of this nature, but there are passages in the judgments which distinctly recognize that such a duty may exist on the part of a customer towards his banker by virtue of the relation of mandant and mandatory, and the authority of Young v. Grote may be regarded as considerably rehabilitated by these expressions of opinion. The question of a banker’s responsibility for the loss of valuables deposited with him by a customer for safekeeping was raised, but not decided, in an action deposited. brought by Mrs. Langtry against the Union Bank of London in 1896. Certain jewels belonging to her had been delivered up by the bank to an unauthorized person on a forged order. The case was settled; but bankers being desirous to ascertain their real position, many legal opinions were taken on the point, and after consideration of these, the Central Association of Bankers issued a memorandum, in which they stated that the best legal opinion appeared to be that a distinction must be drawn between cases in Avhich valuables were by mistake delivered to the wrong person and cases in Avhich they Avere destroyed, lost, stolen, or fraudulently abstracted, whether by an officer of the bank or some other person. That in the former case the question of negligence did not arise, the case being one of wrongful conversion of the goods by a voluntary act for which the bank Avas liable apart from any question of negligence. That, in the second case, that of loss or theft, the banker being a gratuitous bailee, would only be liable if he had failed to use such care as an ordinary prudent man would take of valuables of his oavii. The latter rule is practically that laid doAvn in Giblin v. MacMullen, L. B. 2 P. C. 318, but in estimating the amount of care to be taken by the banker, the nature of the goods, if knoAvn or suspected, and the exceptional means of protection at the disposition of bankers, such as strong-rooms, must be taken into consideration. Methods of obviating both classes of risk by means of special receipts have frequently been suggested, but such receipts do not appear to have come into general use. This gratuitous assumption of the custody of valuables, like the collection of cheques and the usage by which bills are ordinarily accepted payable at a banker’s, and presented and paid there, is an abnormal graft upon the original and simple system of banking. Banks are compelled to afford such facilities and undertake the resultant liabilities by the pressure of competition increasingly enhanced by the concurrence of Post Office and Trustee Savings Banks, state-aided institutions whose returns conclusively demonstrate that they are utilized by classes for whose benefit they were never intended. And naturally this multiplication of the banker’s functions complicates his legal position, inasmuch as, according to the branch of business he is in a particular case pursuing, he may have to be regarded as a debtor, a creditor, an agent, or a bailee. Apart, too, from such unusual transactions as the cashing of crossed cheques over the counter, many banks undertake the discounting of bills and the granting of
125
advances on various classes of securities. This latter branch of business falls within the region of general rather than banking law, but the question has frequently arisen whether a bank has taken a s^ncy. cheque in its capacity as agent for collection, or whether it has taken it as a transferee in the same Avay as a discounted bill. Banks invariably claim the right of redebiting a customer’s account with any cheque which has been dishonoured on presentation, whether such cheque was indorsed by the customer or not, and notwithstanding any entry in the books Avith regard to such cheque. Such course is only justifiable on the supposition that the banker is acting purely as an agent for collection. Where the account is overdrawn at the time the cheque is paid in, when the customer is allowed to draw against the cheque before it is cleared, or where the cheque is at once entered as cash either in the pass-book or the books of the bank, there are authorities, such as ex p. Richdale, 19 Ch. I). 409; MlLean v. The Clydesdale Bank, 9 A. C. 95 : and Royal Bank of Scotland v. Tottenham, 1894, 2 Q. B. 715, which go to prove that the bank become holders for value and proprietors of the cheque in their own right, a position inconsistent with that of a mere agent for its collection. It may be difficult logically to justify the conclusion, but from the late cases of Gaclen v. The Newfoundland Savings Bank, 1899, A. C. 281, and J. Bavins, Jun., and Sims v. The London and SouthWestern Bank, 1900, 1 Q. B. 270, it would appear that in all such cases the bank has really an option Avhich character it will assume, and can, as suits its interest, either redebit the customer, or proceed against the other parties liable on the instrument in its own right as a holder in due course. The primd facie presumption would seem to be that a bank, not being a discount bank, is not likely to Imve taken the document as a transferee, leaving it, however, open to the bank to assert that it did so. The existence of the banker’s lien enables him in many cases to enforce for his oaaui benefit negotiable instruments strictly belonging to the customer. A banker has a lien over all securities of the customer coming to his hands in his capacity of banker for the amount of the general balance due from the customer. The lien extends to money, but not to goods or securities deposited for a specific purpose, as for safe custody, and it is excluded where another agreement relating to the subject-matter is shoAvn. The unauthorized pledging by stockbrokers or moneybrokers of their clients’ securities to secure adATances from banks to themselves has given rise to important and apparently conflicting decisions of the House ^/securf of Lords. In 1888 that tribunal gave judgment °ties.CUn in the case of Lord Sheffield v. The London Joint Stock Bank, 13 A. C. 333. That judgment was Avidely understood as laying down the general proposition, that the nature of the business of the borrower which necessitates his being entrusted with securities belonging to other people was sufficient to put the banker on inquiry as to the extent of his authority to deal with them. In the later case of Simmons v. The London Joint Stock Bank, 1892, A. C. 201, the House of Lords expressly declared that Lord Sheffield’s case had been decided simply on the facts, which, in their Lordships’ opinion, established actual knowledge on the part of the bank of the limited authority of the agent, and that no such proposition as is above referred to was to be deduced from that case. It must, therefore, be taken that no new legal principle Avas embodied in the earlier case. Uor was any new doctrine enunciated in the judgments in Simmons’s case. They merely applied the ordinary rule of law by which the transferee of a negotiable instrument, whether the transfer
