- 20 Marks
LPB – Oct 2019 – L3 – Q2 – Collecting Banker’s Responsibilities under s.81 BEAct 55
Explain the requirements for a collecting banker to obtain statutory protection under section 81 of the Bills of Exchange Act, 1961 (Act 55) when collecting proceeds of a cheque, including acting for a customer, in good faith, without negligence, and in accordance with endorsements and crossings.
Question
Banker’s function to collect proceeds of Cheques Collecting Banker and the Customer.
In United Dominion Trust (UDT) v Kirkwood (1966), it was held that the Banker also has a function to collect proceeds of a cheque for the credit of the Customer’s Account, wherewith, in performing this function, a Collecting Banker becomes a holder, who would receive payment for the Customer’s Account by presenting the said cheque to the Paying Banker for payment. Such transaction is usually dubbed, the Cheque Deposit!!!
By s. 81 BEAct 55, the Collecting Banker is under strict liability to perform the above function and obtain protection if, it does same for a customer, in good faith and without negligence. Others include, in accordance with the endorsement and to the crossing if any.
- in accordance with s. 32(4) BEAct of 1961.
- in line with s. 27 BEAct of 1961.
- That no such endorsement by a legal person shall suffice or be valid.
- That any deviation in the above would constitute “conversion”.
The Candidate, hearing in mind that the, “without negligence” test could date back as far as when the Account was opened for the Customer, is expected to:
- demonstrate understanding of “Who the Customer is”, into such judicial decisions:
- the Mathews v. William Brown & Co. (1894)
- the Great Western Railway v. London and County Banking Co [1901]
- Demon Malawi Ltd v. New Building Society (1991)
- Ladbroke v Todd [1914];
- Commissioner for Taxes v English, Scottish and Australian Bank [1920] and
- Wood v Martin’s Bank Ltd [1959]
Required: State and explain what is required of the Collecting Banker to obtain protection under s. 81 BEAct 55.
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