indicated (Bevan v. National Bank). It is further demonstrated by the Gordon case that the banker only secures protection so long as he is acting strictly as a conduit pipe, or as agent for the customer. If he put himself in the position of owner of the cheque, he no longer fulfils the condition of receiving the money only for the customer. In the Gordon case, adoption of the not uncommon practice of crediting cheques as cash in the bank’s books before the money was actually received was held equivalent to taking them as transferee or owner, and to debar the bank from the protection of sec. 82. The anxiety and inconvenience caused to bankers by this unexpected decision was ultimately removed by the Bills of Exchange (Crossed Cheques) Act 1906, which enacts that a banker receives payment of a crossed cheque for a customer within the meaning of sec. 82 of the Bills of Exchange Act 1882, notwithstanding that he credits his customer’s account with the amount of the cheque before receiving payment thereof. Apparently the scope of this act must be confined to its immediate object, and it does not affect the relations and rights between the banker and his customer or parties to the cheque arising from such crediting as cash. For instance, the customer, in the absence of agreement to the contrary, may at once draw against cheques so credited, while the banker may still debit the customer with the amount of the cheque if returned unpaid, or sue the drawer or indorser thereon.
The protection to the collecting banker is in no way affected by the cheque being crossed “not negotiable,” or by the nature of the fraud or crime by which the cheque was obtained by the customer or any previous possessor, although there are dicta which have been interpreted in the contrary sense. Nor does the fact that the customer is overdrawn deprive the banker of the character of a collecting agent, unless the cheque be definitely given and taken in reduction of such overdraft. Where the conditions requisite for protection exist, the protection covers not only the receipt of the money, but all operations usual in business and leading up to such receipt, on the basis of the customer’s title being unimpeachable. The provisions of the crossed cheques sections of the Bills of Exchange Act 1882 are extended to dividend warrants by sec. 95 of that act, and to certain orders for payment issued by a customer of a banker by sec. 17 of the Revenue Act 1883, as before stated. But the wording of the Bills of Exchange (Crossed Cheques) Act 1906, specifying as it does cheques alone, appears to exclude documents of both these classes from its operation. With regard to the orders for payment, inasmuch as the same section which brings them within the crossed cheques sections expressly provides that they shall not be negotiable, a banker would probably be protected only in taking them from the specified payee, though this distinction has been ignored in some recently decided cases.
Where a banker incurs loss through forgery or fraud in circumstances not covered by statutory protection, his right to relief, if any, must depend on general principles. He cannot charge his customer with payments made on a forgery of that customer’s signature, on the ground either that he is presumed Fraud.to know such signature or that the payment is unauthorized. But if the customer has accredited the forgery, or, having knowledge or reasonable ground for belief that it has been committed, has failed to warn the banker, who has thereby suffered loss or prejudice, the customer will be held estopped from disputing the banker’s right to debit him with the amount (Vagliano v. Bank of England [1891], A.C. 107; M‘Kenzie v. British Linen Co. 6 A.C. 82; Ewing v. Dominion Bank [1904], A.C. 806). The doctrine of the fictitious person as payee may also exonerate a banker who has paid an order bill to a wrongful possessor. Payment on a forgery to an innocent holder is payment under mistake of fact; but the ordinary right of the payor to recover money so paid is subordinated to the necessity of safeguarding the characteristics of negotiability. Views differ as to whether the recovery is precluded only where the opportunity of giving notice of dishonour is lost or prejudiced by delay in reclaiming payment, or whether mere possibility of damage is sufficient (cf. London & River Plate Bank v. Bank of Liverpool [1896], 1 Q.B. 7, and Imperial Bank of Canada v. Bank of Hamilton [1903], A.C. 49).
Cases have frequently arisen where the carelessness of a customer in filling up cheques has enabled a person to fraudulently increase the sum for which such cheques were originally drawn. In Colonial Bank of Australasia v. Marshall [1906], A.C. 559, the judicial committee of the privy council held that the affording such facilities for forgery was no breach of the customer’s duty to his banker, and that the latter was not entitled to debit the customer with more than the original amount. As before stated, the customer’s dealings with the pass-book cannot, in the present state of the authorities, be relied on as debarring him from disputing unauthorized payments appearing therein.
The payment of bills accepted payable at the bank is not, like the payment of cheques, an essential obligation of the banker, and the risk involved is enhanced by the fact that the banker must pay or refuse payment at once, no interval being allowed for verification of endorsements. The abolition Custody of valuables.or modification of the practice has frequently been advocated, but it is one of the facilities which competition compels bankers to extend to their customers. On the same basis stands the receipt of a customer’s valuables for safe custody. The question of the banker’s responsibility for the loss of goods so deposited with him was raised, but not decided, in an action 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 which valuables were by mistake delivered to the wrong person and cases in which they were 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 was 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 own. The latter rule is practically that laid down in Giblin v. MacMullen, L.R. 2 P.C. 318, but in estimating the amount of care to be taken by the banker, the nature of the goods, if known 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.
Theoretically, bankers are supposed to refuse accounts which are either expressedly or are known to be trust accounts. In practice, however, it is by no means uncommon to find accounts opened with a definite heading indicating the fiduciary capacity. In other cases, circumstances exist which affect Trustees.the banker with notice of that capacity. In either case, however, the obligation to honour the customer’s cheque is the predominant factor, and the banker is not bound or entitled to question the propriety or object of the cheque, unless he has very clear evidence of impending fraud (Gray v. Johnston, L.R. 3 H. of L. 1). Even though the banker have derived some personal benefit from the transaction, it cannot be impeached unless the banker’s conduct amount in law to his being party or privy to the fraud, as where he has stipulated or pressed for the settlement or reduction of an ascertained overdraft on private account, which has been effected by cheque on the trust account (Coleman v. Bucks & Oxon Union Bank [1897], 2 Ch. 243). A banker is entitled, in dealing with trust moneys, known to be such, to insist on the authority of the whole body of trustees, direct and not deputed, and this is probably the safest course to adopt. Scarcely larger responsibility devolves on Joint Stock Banks appointed custodian trustees under the Public Trustee Act 1906,
