Scottish Court of Session Decisions

The pursuers unfortunately did not present that cheque at the moment, and before they did present the cheque Mr Moffatt had died, his death being sudden. The result of that was that naturally enough the Clydesdale Bank refused to pay the cheque when presented; and the present action is directed by the Messrs Kirkwood against the Clydesdale Bank for payment of the cheque. Now, the pursuers cannot deny that, so far as the ordinary operation of the cheque was concerned, the Clydesdale Bank were perfectly within their rights, and it was according to their duty to refuse payment of the cheque, because section 75 of the Bills of Exchange Act 1882 says perfectly clearly that “the duty and authority of a banker to pay a cheque drawn on him by his customer are determined by (1) countermand of payment, and (2) notice of the customer's death.” It is not denied that at the time the cheque was presented the Clydesdale Bank had notice of the customer's death.

But the pursuers rely upon the second sub-section of the 53rd section, which says—… [ quotes supra] … The pursuers say that the Clydesdale Bank had funds in their hands belonging to Mr Moffat, and that accordingly this cheque being an intimated assignation of these funds they are bound to make the same forthcoming. This statement of having funds in their hands belonging to Mr Moffatt the Clydesdale Bank deny; but the state of the facts as elucidated by the proof is this—Mr Moffatt, in accordance with a common practice, kept several accounts, and, using the nomenclature that is common in Scottish banking, these accounts may be described as Current Account, Loan Account, and various Cash Accounts. Now, the Current Account is, as its name indicates, an account on which the ordinary transactions from day to day are made, and there is no question that this cheque was intended to be drawn upon that Current Account. In point of fact it was drawn, not by Mr Moffatt himself, but by a gentleman connected with his firm who had right to draw upon this account and upon no other. The state of affairs as at the death of Mr Moffatt was that in the bank's books there was on that Current Account a credit balance in favour of the customer. But there were other accounts, namely, the Loan Account and various Cash Accounts, and in all of these, as was natural, there was a debit balance against the customer. There is no question whatever that the sum of these debit balances against the customer amounted to a sum much greater than the credit balance upon the Current Account.

It is quite true that against these debit balances upon the Loan and Cash Accounts the bank held various securities, partly consisting of stock and shares belonging to the debtor himself, and partly consisting of guarantees by various third parties, which guarantees for the purposes of the argument may be assumed to be good guarantees,—that is to say, guarantees given by persons who if called upon are equal to meet the amounts. Now the argument therefore really has come to this—In the circumstances is the bank's answer that it has no funds of Mr Moffatt a true one or not?

I am of opinion that it is a true one. It seems to me that the state of affairs between a banker and his customer as at any given time must be taken to be the state of affairs upon all accounts, and the state of affairs on all accounts shows perfectly clearly that the bank did not owe the customer, but the customer owed the bank, money. I do not think that fact is disturbed by either of the two considerations which have been pressed upon us by the counsel for the pursuers. One consideration is the question of what security the bank holds. That is a matter of very great moment for the bank, but none the less it does not seem to me to alter the relation of debtor and creditor as between the bank and its customer. That becomes very clear if you look at the security such as is given by an outsider—by a cautioner or by a guarantor. What is caution? It is not to pay money that you owe yourself, but it is to pay money that is owed by somebody else. In other words, the very hypotheses of a cautioner being called upon is that the customer is truly in the relation to the bank of a debtor and not a creditor. As little I think is the fact I have mentioned affected by the rule in support of which reference was made to the English cases of Buckingham and of Cumming v. Shand. That is the rule which lays down that a banker who is in the habit of honouring his customer's cheques to the extent to which he has funds at that customer's credit upon a current account is not entitled, without notice, at any moment, to turn round and refuse to honour these cheques because as a matter of fact there are other loan and cash accounts, and because, as a matter of fact, if all the accounts were massed the customer would be found to be a debtor and not a creditor. That seems to be common sense; and really it is a rule without which the ordinary banking practice with customers would be impossible cash accounts generally, and loan accounts always, have from their birth a debit balance against the customer, and a customer who happened to have a loan account or a cash account as well as a current account would never be in security to work on a current account at all, because he might never know at any moment when a cheque might be dishonoured upon presentment. But that does not affect this question. The question here as upon a question of honouring a cheque is gone, because the cheque as a cheque was countermanded by death; and the whole question is, what is the right which is given by the section of the statute which says that a cheque shall operate as an assignation. It seems to me quite clear that the expression “where the drawee of a bill has in his hands funds available for the payment thereof” must mean funds as

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