a. The Tort of Conversion and Its Arising in Cheque Collection (5 Marks)

The tort of conversion is a common law civil wrong where one party intentionally deals with another’s property (chattel) in a manner inconsistent with the owner’s rights, effectively denying the owner’s dominion over it. It requires no intent to deprive permanently but focuses on wrongful interference, leading to damages equivalent to the property’s value.

In cheque collection, conversion arises when a collecting bank receives and credits proceeds of a cheque to the wrong person’s account, acting as an agent for collection. The bank “converts” the cheque by treating it as belonging to its customer, infringing the true owner’s rights. For example, if a stolen cheque is deposited, the collecting bank converts it by presenting for payment and crediting the thief’s account. This is illustrated in Marfani & Co Ltd v Midland Bank Ltd [1968] 1 WLR 956, where the court held that collection without title exposes the bank to conversion claims by the true owner. In Ghanaian practice, this is common in fraud cases, as seen post-2017 cleanup where banks faced suits for mishandling crossed cheques.

b. Statutory Defence for the Collecting Banker (15 Marks)

The primary statutory defence is under Section 81 of the Bills of Exchange Act, 1961 (Act 55) (likely a typo in topics as “section g I” – intended as Section 81), which protects the collecting banker from conversion liability if it collects in good faith and without negligence for a customer. Key elements and explanations with case law:

• Good Faith: The bank must act honestly, without knowledge of defects in title. In Lloyds Bank Ltd v Savory & Co [1933] AC 201, good faith was upheld where the bank had no suspicion.
• Without Negligence: The bank must prove reasonable care. Negligence fails in three broad areas (as per query context, though not directly asked here but relevant):
  1. Failure to Verify Customer Identity/Account Opening: Not inquiring into suspicious account openings. In Lumsden & Co v London Trustee Savings Bank [1971] 1 Lloyd’s Rep 114, negligence was found for not verifying references.
  2. Ignoring Crossing or Endorsements: Collecting crossed cheques without proper inquiry. Great Western Railway Co v London and County Banking Co Ltd [1901] AC 414 held negligence for collecting “not negotiable” crossed cheques without title checks.
  3. Suspicious Circumstances: Ignoring red flags like large sums in new accounts. In Marfani & Co Ltd v Midland Bank Ltd, the bank was negligent for not querying a known employee’s deposit of employer cheques.
• For a Customer: Protection applies only to existing customers, not one-off collections. Great Western Railway clarified “customer” requires an account relationship.
• In the Ordinary Course of Business: Collection must follow standard procedures.

Case law reinforces: In Gordon v London City and Midland Bank Ltd [1902] 1 KB 242, protection was denied due to negligence in endorsements. In Ghana, courts apply this strictly, aligning with BoG’s Anti-Money Laundering directives (e.g., under Act 930), where failures led to fines during 2019 revocations (e.g., uniBank). Practically, banks mitigate by KYC protocols; if proven, the defence absolves liability, shifting loss to the paying bank or fraudster.