Lecture 2 Cases

Definition of Bank and Banking business

In the case of United Dominion Trust v Kirkwood, the conduct of current accounts, the
payment of cheques, and the collecting of cheques for customers are all activities that a
banking business engages in. Even if the bank does not actually carry out the duties outlined,
as long as there is proof of the bank's credibility for carrying out banking activities, it will
suffice. In the case, Lord Denning explained that bankers have two key characteristics: first,
they accept money from their customers and receive checks for them, placing them to their
credit; second, they honour cheques or orders drawn on them by their customers when
submitted for payment, debiting their customers accordingly. Aside from the two, a bank
holds current accounts, or something similar, in their records, where the credits and debits are
registered. The method taken in the UDT case was one that was flexible. It had not been
determined in a strict sense.
In the case of Re Roe Legal Charge, a financial firm had established current accounts for
them, received checks on their behalf, and offered other banking services, according to the
evidence. However, the amount of deposit and savings accounts was reduced, and the
institution only cleared 50 checks. Furthermore, the firm had not made its services available
to the general public. It was decided that it was a banking business, despite the fact that the
number of things cleared by the company was restricted, and that the company's banking
business was minor in comparison to a traditional bank.
In the case of Re District Savings Bank Ltd. Ex Parte Coe, it was stated that “Even that
branch of the company's business which has most resemblance to banking differs materially
from the ordinary business of bankers, for the company did not honour cheques payable on
demand and drawn upon themselves, but only allowed deposits to be withdrawn upon notice
… It therefore appears to me impossible to say that this could be considered a banking
company.” Despite offering other banking facilities, it was not considered a bank because it
did not provide current accounts. As a result, it was regarded as an unusual banking practice.
In the case of Sinclair v Brougham, a society that was not registered under the Building
Societies Act 1936 established a banking company known as Birkbeck Bank, which
eventually failed. The banking company was deemed invalid, and the creditors, who were the
depositors, were unable to reclaim any funds. The building society's power had to be
restricted to its proper purposes, according to the court, so the banking business was void
because it was for the society's benefit. Its aim is commercial and economic, according to the
concept of "bank." The use of personal funds for the benefit of the community is not
considered a commercial operation.
In the case of Chettinad v Commissioner of Income Tax Colombo, the appellant company
was alleged to be liable for income tax from its proceeds earned in the Ceylon branch. The
court held that the test to decide whether a business is a "bank" is whether it accepts deposits
of money on current accounts or otherwise, subject to withdrawal by check, draw, or order.
In the case of Commercial Banking Co of Sydney Ltd v Federal Commissioner of Taxation,
the appellant’s business was sued for income tax for debt business. The court held that the
bank’s primary business was the lending of money.
In the case of Re Securitibank (in liquidation), the case was concerned with the claims in
relation to the liquidation. Companies classified as merchant bankers and participating in the
short-term money market, bills market, and a wide variety of financial activity were not
“carrying on the business of banking,” according to the court, and therefore were not
excluded from the Moneylenders Act 1908.
In the case of Bank of China v Lee Kee Pin, the Bank of China, which had been doing
business in Malaysia, had been denied a licence to continue doing so. As a result, the Bank
sought to recover debts as a result of this impact. The defence claimed that the debt recovery
proceedings were in violation of S.3 of the Banking Ordinance 1958 because it lacked a
licence to execute them. The court held that a bank operating in Malaysia was not carrying on
a banking business under S.3 of the Banking Ordinance 1958 because it was later denied a
licence and forced to go to court to recover debts. Rugby J noted that preventing a bank in
liquidation from recovering debts owed to them would be both difficult and unfair. As a
result, it is not appropriate to include debt collection as part of the banking business, as this
would prevent the bank from collecting all amounts owed to them in the absence of a licence.
In the case of Koh Kim Chai v Asia Commercial Banking Corporation, the respondent was a
bank in Singapore that did business. The appellant agreed to charge his land in Malaysia to
the bank as a guarantee for overdraft facilities provided to the bank's customers, two
Malaysian companies and a Singapore firm. The appellant argued that the respondent's
actions were in violation of the Banking Act 1973, claiming that requiring and accepting
charges of Malaysian land to secure loans and implementing the protection was going on a
banking business without a licence in Malaysia. Accepting charges of Malaysian land was
deemed to be conducting banking business, according to S.3(1) of the Banking Ordinance
1958, by this court. The court disagreed, arguing that a banking business's primary operation
should be banking. The Privy Council ruled that “making advances to customers” as specified
in S.2 of the Banking Act does not involve obtaining security from third parties. S.2 of the
Singapore Banking Act states that it does not apply to the taking of security in the course of a
banking business.
In the case of Vernes Asia Ltd v Trendale Investment Pte Ltd, the plaintiff was a Hong
Kong-based deposit-taking firm that had no office or business premise in Singapore. The
defendants claimed that the plaintiff was conducting illegal banking business in Singapore.
The court held that receiving money on current or savings accounts, paying or collecting
checks, and making advances are all examples of banking business, according to S.2 of the
Banking Act. The term "banking business" is not construed in a disjunctive manner, implying
that making advances to customers is not enough to be considered conducting banking
business. S.4(1) of the Banking Act, which forbids any banking business from being
conducted in Singapore without a licence, as well as S.2 of the Act, which defines what
constitutes "banking business," is cited by the court. The moneylender's defence had been
raised, but the plaintiff's counsel argued that since the plaintiff was a bank in Hong Kong, it
did not qualify as a moneylender under S.2 of the Moneylenders Act.
In the case of Banque Nationale De Paris v Wan Swee May & Anor, the plaintiff is a
Singapore branch of a French bank. The plaintiff had no branch in Malaysia. In this case, the
plaintiff had conducted business in Malaysia and offered financial facilities in foreign
currency to the first defendant to purchase shares in Malaysia. As a result, some securities
were deposited with the plaintiff’s nominee in Malaysia. Upon the default of repayment,
enforced a judgment against the defending in Singapore and registered in Malaysia. It was
held that the plaintiff could not be construed to have been conducting banking business,
hence, BAFIA is not contravened.
In the case of Sabah Development (SDB) v SKBS & Ors, the plaintiff, a development bank,
was established by the State of Sabah to provide medium and long-term loans to private and
state-owned businesses in Sabah. The defendants' key argument was that the plaintiff was not
registered as a bank under the Banking Act 1973 and had transacted unlawfully, resulting in
the transaction being declared void under Section 24 of the Contracts Act 1950. The plaintiff
is a development bank that has been granted permission to use the term "bank" by the
Minister under Section 9 of the Banking Act 1973. As a result, the plaintiffs did not need a
banking licence to expand the loan to the first defendants under the Banking Act of 1973. The
court noted that as a development bank, a bank must meet the criteria of accepting current
accounts, paying cheques drawn on himself, collecting cheques, and going on with any and
all aspects of business. Furthermore, the Bank Negara Malaysia had not expressed any
criticism of the plaintiff's actions. As a consequence, by lending money, the plaintiff had not
broken any laws.
In the case of Bank Industri (M) Bhd. v Techno Corpn. Bhd. & Ors, the applicant is a
limited liability corporation (LLC) incorporated under the Companies Act of 1965. Its aim
was to foster economic and social progress. It was given permission to conduct business by
BNM and the appropriate Ministry. It manages funds collected from international
organisations such as the World Bank and the Islamic Development Bank. The plaintiff took
action against the second defendant as a credit guarantor. The second defendant claimed that
the credit facilities provided were illegal and that it did not have a BAFIA licence. The
construction finance business that Bank Negara was allowed to conduct was deemed to be a
"scheduled business" as specified by the Third Schedule of the BAFIA. It fell under the
definition of "growth finance company" in section 2 of BAFIA, which is described as the
business of providing capital or other credit facilities on terms that enable them to be used for
manufacturing, agricultural, commercial, and other economic development, as well as other
similar activities with the Minister's permission.
Definition of Customer
In the case of Great Western Railway Co. v London and County Banking Co. Ltd., the
existence of a deposit or current account with the bank, or any entry of debit and credit in a
book or papers of the bank pertaining to his transactions, is a significant criterion for deciding
a bank customer. Despite the fact that H cashed checks at the bank on a daily basis, the court
ruled that he was not a client because he did not have an account with the bank.
In the case of Woods v Martins Bank Ltd, the plaintiff had been introduced to a bank
manager who had offered him investment advice. The manager dictated a letter to the
plaintiff, asking him to sign it and instructing the bank to complete those orders. Even though
his account did not exist until later, Woods is considered by the court to be a customer since
he invested in a business on the advice of the manager. The relationship began when the
officer decided to open an account for the plaintiff rather than when the advice was given.
Furthermore, there were previous discussions that suggested Woods would open an account
with the bank and that a contract would be signed.
Intention to contract
In the case of Robinson v Midland Bank Ltd, the plaintiff sued the defendant bank for
25,000 pounds in compensation for money he had and earned for his own use. Someone else
opened an account in his name at the defendant's bank, and a cheque for £150,000 made
payable to his order was deposited into it. The next day, a forged cheque in the sum of
130,000 pounds was purportedly drawn by him, by an individual H, and the balance was also
withdrawn using forged checks. The court held that the relationship between a banker and a
customer does not occur if a person has no intention of being a customer of the bank by
opening an account with the bank because the person just pretended to be a customer of the
bank. Even if the person's name indorsed on the cheque is the same as his name, the claim to
money is contingent on the person's purpose.
In the case of Thavorn v Bank of Credit and Commerce International, a woman set up a
bank account in her nephew's name, who was under the age of 18. She gave the bank
guidance on how to handle the account. The court determined that the assumption of resulting
trust was insufficient proof of a desire to support the nephew.
In the case of Oriental Bank of Malaya v Rubber Industry Replanting Board, a fraudster
named Lee Man Choi received a RIRB crossed cheque in the name of one Kok Ann Rubber
Estate and demanded that the Central Bank of Malaya in KL create an account in the name of
Kok Ann Rubber Estate. He presented his identification as well as a forged registration
certificate. He deposited the cheque and took the money out. Following Ladbroke and the
Commissioner of Taxation, the trial court determined that Lee Man Choi was a customer as
specified by section 82 of the Malayan Bills of Exchange Ordinance 1949. The court
overturned the decision, finding that RIRB was entitled to pursue a claim for check
conversion due to OBM's negligence.
In the case of Stoney Stanton Supplies (Coventry) Ltd. v Midland Bank Ltd., a con artist Mr.
Fox approached a Mr. Taylor, who owned a grocery store under the name R.H. Taylor
(Coventry) Ltd. and offered to purchase the store under his name. Mr. Fox founded the
Stoney Stanton Supplies (Coventry) Ltd business. Mr Taylor was convinced to allow the new
company to take over the business before the sale agreement was signed, and two directors
were appointed. Mr. Taylor then introduced Mr. Fox to his bank manager in order to set up an
account for him. After that, forged documents were used to set up an account under the new
company's name. Mr. Fox then took money from the company's bank account and transferred
it to his personal accounts. R.H. Taylor (Coventry) Ltd went on to claim against SSTC Ltd in
order to recoup the money from the company sale. SSTC Ltd then sued the bank for
improperly paying out money without its authorization and/or failing to show due caution
while cashing checks. Since there was no privity of contract, the court held that a company
whose account had been established in the name of a fraudster could have no right to sue the
bank for the money.
Account opened under an assumed name
In the case of Barclays Bank v Okenarhe, A fraudster stole a Building Society pass book and
created an account in the name of the owner, Mr. Crouch, at the Plaintiff's Sloane Square
branch. Okenarhe was required to withhold the proceeds of the cheque until the Building
Society's cheque was cleared, and the bank was asked to recover the funds of the passbook
for the account. Okenarhe, who had an account with the Plaintiff's Battersea Park branch,
transferred the funds in his Battersea Park branch account. The Defendant They wanted to
use their right of set-off against the two branches' bank accounts. Okenarhe said, among other
things, that he was not a customer of the bank at Sloane Square because the bank had made a
fundamental error in determining the customer's identity and therefore had no right of set off.
When the bank opened an account in Mr. Crouch's name at the Sloane Square branch, the
court ruled that the bank wished to contract with the individual physically present at the
branch. As a result, Okenarhe was a bank client, and the bank had a right of set-off between
the two accounts.
In the case of Ashkenasky v Midland Bank Ltd, the court held that since there was no privity
between the parties, when a bank account is opened in the name of another, the individual
identified as the account holder has no case against the bank.
In the case of Robinson v Midland Bank Ltd, the plaintiff sued the defendant bank for
25,000 pounds in compensation for money he had and earned for his own use. Someone else
opened an account in his name at the defendant's bank, and a cheque for £150,000 made
payable to his order was deposited into it. The next day, a forged cheque in the sum of
130,000 pounds was purportedly drawn by him, by an individual H, and the balance was also
withdrawn using forged checks. The court held that the relationship between a banker and a
customer does not occur if a person has no intention of being a customer of the bank by
opening an account with the bank because the person just pretended to be a customer of the
bank. The bank thus not liable to the real named account holder as there was no privity of
contract between them.
In the case of Commissioners for Taxation v English, Scottish and Australian Bank Ltd., a
taxpayer in Sydney wrote a “Pay 053 or Bearer” cheque, which is the standard form of
writing cheque in Sydney. The number 053 corresponded to the cheque's last four digits. The
taxpayer deposited the cheque in the tax office's mailbox. It was stolen, and the thief opened
an account in the name of 'Stewart Thallon,' deposited the cheque, and withdrew the money
the next day. The Plaintiffs filed a lawsuit against the Bank for conversion. Section 88 of the
Commonwealth Bills of Exchange Act 1909 provided legal protection to the Bank. A
individual who established an account with a bank the day before he deposited a stolen check
was considered a customer of the bank, according to the court.
Casual Service not Customer
In the case of Tate v Wilts and Dorset Bank, a customer had asked the defendant bank to
cash a cheque on his behalf. After the bank confirmed that the cheque would be paid, the
cheque was drawn in favour of an individual with whom he had traded. With the cheque, the
man said he would open a bank account. The man was determined not to be a client but
would become one if the check was collected.
In the case of Kehar Singh a/l Jasa Singh v Standard Chartered Bank, a stranger had
entered the bank and diverted the couple's attention by luring them to the ground in order to
collect money. The stranger grabbed the money on the counter and walked away while the
customers were busy. While the couple was a "walk-in" client, the court found that the bank
owed them a duty of care because they had signed a contract for the purchase of a bank
draught.
In the case of Balmoral Supermarket Ltd. v Bank of New Zealand, armed robbers stole
money from the plaintiff as he stood at the register, ready to hand it over to the cashier for
counting. It was decided by the courts that the bank was not responsible because the money's
title had not been transferred to it.
In the case of Woods v Martins Bank Ltd, the plaintiff had been introduced to a bank
manager who had offered him investment advice. The manager dictated a letter to the
plaintiff, asking him to sign it and instructing the bank to complete those orders. Even though
his account did not exist until later, Woods is considered by the court to be a customer since
he invested in a business on the advice of the manager. The relationship began when the
officer decided to open an account for the plaintiff rather than when the advice was given.
Furthermore, there were previous discussions that suggested Woods would open an account
with the bank and that a contract would be signed.
In the case of Importers Co. Ltd v Westminster Bank Ltd, an English bank had received
cheques drawn on other English banks and paid into international banks by the bank's
customers as an agent for a foreign bank. It was decided that if a bank uses another bank to
clear its checks, the bank is considered the other bank's client. According to Atkin LJ, a
clearing bank's customer is a non-clearing bank.