BANKER AND CUSTOMER.

Otago Witness, Volume 25, Issue 2321, 25 August 1898, Page 19

BANKER AND CUSTOMER.

I A SOUTHLAND CASE. Wednesday, August 17. In the Supreme Court in Banco on Wednes- ' clay, before his Honor Mr Justice Pennefather, the case of Fleming v. Bank of New , Zealand, which had been reserved for further | consideration at the recent civil sittings at j Invercargill, came on. j Tho case came up in the form of a motion by plaintiff for judgment on the findings, and motion on behalf of the defendant for a non- ! suit or for judgment for the bank, or in the alternative for a new trial on the grounds of misdirection and the improper admission of evidence, and on the further ground that tho damages were excessive. The plaintiff, James Fleming, farmer, of Rakahouka, Southland, at the last sittings of tho Supreme Court brought an action against 1 tho defendant for damages for the dishonour ! of cheques drawn by him for which provision was alleged to have been made. The cheques j were dishonoured on the 6th September la<t, ' but were paid before noon on the following i day. The jury awarded the plaintiff £2000 damages. I Mr Sim and Mr Rattray (of Invercargill) ! appeared on behalf of the plaintiff, and Mr | Ollivier (of Wellington) and Mr Hoskmg on behalf of the defendaut bank. When the case was called, His Honor said: Is it proposed to go into tho whole question now? Mr Sim said that lie understood it was. His Honor: I again intimate, as I did at Invercargill, that I think these proceedings here are inadvisable, and can only result m j a waste of time and money. The best pos- ! siblo tribunal for a nonsuit or a new trial is 1 what is cjilled in England the Divisional ! Court, composed of a body of judges, lnat ! is provided in this colony by the Court of ! Appeal. I think, as I said before, that it •would be bettor to move the matter at once ' into the Court of Appeal, which sits in October I have no power to do this without Ine consent of the parties, but I do think, as the judge iwho tried the case, that the present is a most inconvenient tribunal. Having given that intimation, I can of course say no more. No doubt the matter will come before the Court of Appeal, and be tried twice over. Mr Ollivier said he had not understood that his Honor had given so plain an intimation to that effect. If he had so understood he would have sought to give effect to it. His Honor read the report of his remarks . on the previous occasion, and added that by j movinjr the case direct to the Court of Appeal : it would have come before a court of which ho was one of the judges, whereas by the present arrangement the case would go batore a court on which the judge who tried the case would not be sitting, and that, he thought, was a most inconvenieiit arrangement. Mr Ollivier said be did not know lnat _he could give effect to his Honor's suggestion now, seeing- that il came to him so late m the day. Ho would, if his learned friend pleased, take an opportunity of consulting him on tho subject, but he could hardly act on the spur of tho moment. 'His -Honor said that he had not had an opportunity of mentioning the matter to both, sides. Having staled Lie views, he was now prepared to go on. Mr Ollivier submitted, on beiialf of the defendants, that there was no contract proved excepting a contract made between the parties on tho 6th September for the payment of the cheques which had actually come before the bank, and that that contract was performed in every respect. The evidence in the ease disproved tbo contract relied upon by the plaintiff. The evidence showed that it was arranged on the 2?th August that the plaintiff was to have an overdraft of £1200, which was to be cleared by the sale of certain sheep that were then in the freezing works, ihat was the aspect which presented itself to the bank manager. Mr Sim: Which the jury found was not . the case. j Mr Ollivier : The jury found that the sheep were to be regarded as the source from which that account was to be cleared. Mr Sim : One of tlie sources. Mr Ollivier: Either with or without other | property, such as pelts that were then in the hands of one of the tannery companies. Subsoquent to that arrangement ihe plaintiff sent to the freezing works from time to time 1208 more carcases, and on the 4th September he drew certain cheques in payment for sheep which he had purchased from various persons. These cheques were drawn by him at the freezing works' office, and one of the cheques was handed over to Mr Thompson, manager _of j the freezing works, or some of his assist- i ants, in order that ifc might be paid into tho • account of the person in whoso favour it was made. The other cheques were given direct to the several persons in whose favour they ; were drawn. At this time, on that Saturday, i Fleming's account was overdrawn £1104-, and he had, therefore, £96 to draw before reach- ! ing the limit fixed between himself and the bank manager. These cheques which Meming actually drew on the Saturday they knew now amounted to something like £650, with j another cheque which had not come in, and ; which would have carried the account over . tho limit to something like that extent. ; Fleming then, feeling that he was going beyond the permission he had obtained to overdraw, sought to see the banker, but it was past banking hours and the banker had gone. Fleming actually seemed to have gone to the , bank, but, the banker having left, he did not choose to see the accountant or any inferior officer. I His Honor: The bank was closed. Naturally he would immediately go to the private house of the banker, which lie did. ( Mr Ollivier did not think it mattered. The fact remained that Fleming sought to see the manager but failed to do so, and went back \ to Thompson and said to him something to this effect, "Will you pay to my credit en Monday £1000 to meet the cheques I have been drawing." Thompson said, " Yes, certainly," and Fleming went away quite contented into the country. On the Monday morning (September 6) Thompson went to the banker about half-past 10 and said at once, "Fleming has asked me to pay into his account £1000 to meet cheques which he has been giving for sheep purchased by him." He did not pause for an answer, and it did not seem to have needed an answer, and he ' went on to propose something which was entirely different, and which he had no authority to propose. "It would suit me better," he said, "if you would take a store warrant oyer_ sheep to that value." The ! banker said it made no difference to him — ho was just as ready to take a store warrant to the valuo of £1000 as he was to take £1000 in cash, and Thompson could do what he pleased about it. Thompson went i away, and with the assistance of Mr ' Cochrane prepared a store warrant, not over sheep belonging to him, but over sheep belonging to Fleming, which were in the control of the Freezing Company at the time. Some little difference arose between Thompson and . Cochrane aa to what number of carcases were

', to be included in the warrant, but the warrant ' was made out for 2250 sheep, and was sent j in on th& same morning to the bank. That 1 was absolutely all (hat occurred. After the S interview between the banker (Mr Chisholm) 1 and Thompson in the morning, the cheques came pouring into the bank, and these were j put by by the accountant, and brought to the j notice of the manager about 4.30 p.m. The manoger seemed to have been astonished at the amount of these cheques, and immediately Rallied out to make pome inquiries Whether Chisholm was too reticent or not in the inquiries ho made was a very nice point. He tried to see Thomas Fleming, a brother of the plaintiff, but Thomas Fleming had left his office and gone home for the day. The manager was puzzled, but it occurred to him that the next best thing to do was to go back to Thompson ; but Chisholm, counsel supposed, was a Scotchman, and though he put a question to Thompson he did not succeed \ in eliciting any information on the point on j which he wanted to bo informed. Then the , cheques were returned unpaid, and a letter ' was written to Fleming, on the afternoon of ; the 6th September, by tho manager stating that his account was overdrawn £1195 on that ,' day, and that he regretted he was unable : to pay the cheques presented that day. The account seemed to have been drawn upon ' during the day to the extent of the difference between £1104 and £1195, so that really there was only a balance of £4 odd when the cheques came tumbling in on the afternoon of Monday, and it was, therefore, quite clear, i that unless the manager had pledged that he would honour cheques in excess of the £1200 limit to which he had agroed on tho 28th . August, the bank was not bound to pay these ' cheques. It was elementary law that in order to constitute an agreement there must be a consensus ad idem of both parties. The difficulty here was to pee whether in the interview of the 6th September between Thompson and the manager thoro was any intention whatever on the part of the manager to enter into the new contract sot up by the plaintiff. Mr Sim: The jui.y found that he did. ; Mr Ollivier apprehended that ihe evidence disproved it entirely. Jf Thompson was to be anything more than a mere messenger, let them consider' how extremely unfit a person he was to be sent as a negotiator to Fleming, armed with a power to make a new contract in Fleming's interest. In the first place, Thompson' did not know that Fleming had an overdraft. ; His Honor : Does that appear? "Mr Ollivier: Quito clearly. • Mr Sim: No, not so. ; His Honor: What evidence is there? Mr Ollivier quoted from the notes of Thompson's evidence: "Did not even know that Fleming had an overdraft. . . . Know nothing of Fleming's banking transactions." Thompson did not know how many cheques had been drawn by Fleming in payment for sheep, and he did not know the names of the persons in whose favour they were drawn except one. whose cheque had been banded to him in order that it might ba paid into the bank on the following morning, but he seemed to know that the cheques amounted in the aggregate to about £650. Though he knew that, yet when he went to tho bank he did not mention Ihjit, and therefore they might treat him as if ha did not know that either. He did know that more fcheep had gone into the works and that they held 3458 carcases in tho whole, but he did not know that any arrangement, at all had been made by which 2250 of these very sheep wore more or less pledged as the source from which the advance already obtained was to be cleared. Mr Sim: The jury have found that they were not pledged. > Mr Ollivier s?id he took that as a convenient expression to use. The jury had found at all events that the 2250 sheep, perhaps in common with something else, were tho source from which the overdraft was to be cleared, so that he apprehended that ho was not incorrect in saying that they were | more or less pledged for the payment of the ' overdraft. Supposing that Thompson had ; known that 2250 of these carcases were already indicated as a source from which the j overdraft was to be cleared, it was a curious i speculation whether he would have been so ready to pay hat he would pay £1000 to Fleming's credit, for Thompson had in his hands only 3458 carcases, some fat, and some rejects. Thompson went there, but did not communicate the interesting fact that he had 3458 carcases, and did not tell how it was the Freezing Company itself which was making the advance against property in its possession. The proposed payment in was treated at large by Thompson as a mere sum in cash, and there was nothing to indicate that it was other than ■ a moro amount of cash to be paid into Flem- \ ing's account arising from some source or other wholly unconnected with the property that 1 was the source from which the original overdraft was to be cleared. It was quite easy to see that Thompson and the banker were quite at cross purposes during the interview, if any such inference was to be drawn, as the plaintiff sought to attach to that interview. Supposing that Fleming had seen the manager instead of failing to see him, how differently would ho have approached the whole n.atter! The manager would then have had an opportunity of considering the circumstances, and would have had an opportunity , of saying "No" — that he did not feel disposed to make any further advance than the £1200 agreed upon on the 28th August. Counsel submitted that all that took place between Thompson and the manager must be criticised i by what the manager knew and what Thompj son did not know. The manager knew that | the existing right to overdraw had not been 1 exhausted, and therefore when it was proposed that £1000 should be paid in he was not in the least surprised to hear that some moro cheques had been dra-wn and would come to hand shortly, and it did not occur to him at j all that he was asked to enter into some new ' contract. The whole thing was equivocal — | it might have meant one thing or another, and it depended upon the way it presented itself to the mind of Chisholm whether he was to be held to have contracted or not. The cnus of proof lay on the plaintiff and if these slight facts, which were the only facts that came into the matter, were capable of being viewed in- two different lights, then there was no affirmative balance of testimony which established the contract relied on. There was no consideration for the promise which was alleged to have been made. Either Thompson had a right to pledge sheep belonging to Fleming or he bad not. If he bad not this point would b*e untenable, but counsel was assuming that there was an intention to contract, and, passing on from that, he said that no ( valid contract was made because the very se- ; curity which was proposed could not be given, and was not effectually given. It could not bo given because Thompson h.id r.ot authority to give it and had no right to pledge the goods, and his assumption of the right to pledge did not really result in the bunk getting security at all, and Fleming might have appeared five minutes afterwards and said to Chisholm that Thompson had no authority to give a store warrant, and that * he (Fleming) insisted on its being returned. ' If that was so, the V6ry security which the

banker was supposing he was getting was no security at all, but was so much waste paper, and consequently as a special contract was now relied on to provide for, cheques over and above the funds belonging to the customer there must bo a consideration to support it ; and here, if there was absence of authority to pledge, there was no pledge, and if there was no pledge there was no consideration. The so-called contract was to pay cheques, tiie number, amounts, and payees of which were unknown to the banker, in order to pay for sheep that Fleming had purchased. Where I a person was getting value for a cheque, all business people recognised that they would be justified in making a substantial advance i against it, for they knew that the customer ! had got an equivalent. Whose duty was it ' to identify the cheques which ccmc within that category? Without hesitation ho ?:udit was the duty of the customer to make it. quite clear to the banker what cheques T ie had to pay under thai obligation which 'ne bank was said to have entered into. The bank would not be bound to pay a cLrquu drawn by Fleming for some other purpt-s?. It would not be bound to pay cheques which he might have givon, if he had 'oenw a contractor, in connection with a coxitract he was carrying on, and it would not be bound — to put an extreme hypothesis — to pay cheques for money lost in wagering or any other purpose which obviously would not result in his having a quid pro quo. The banker would be justified in paying any cheque signed by Fleming, but he would not be bound, and as it was an obligation he was paid to have undertaken, he" was entitled to restrict his obligation as much as possible. His Honor: Take a parallel case, Mr Ollivier. Supposing I write to my banker in London and say: "During the year I am going to remain in New Zealand 1 shall want io go on paying my usual charitable subscriptions in London, and I hope you will kindly honour my cheques," and the banker writes to mo to say, " I will honour the cheques you refer to." Cheques are presented to him, ', and he refuses to pay on the ground that he does not know if they are for charitable subscriptions or not. Is he justified in refusing to honour on the ground that he does not know ; if they are drawn for charitable subscriptions or not? Mr Ollivier did not admit that the cases wore parallel, and he suspected that in the case his Honor had put the banker would be quite prepared to pay any cheques that came to hand. In the present case cheques wore indicated in a shadowy manner, and a restriction was imposed on the cheques and on the obligation of the banker to pay, and that restriction was in favour of the banker. The cuetomer should havo identified each cheque as it was presented, and said, "I have got value for this cheque ; you are bound to pay I under the contract."

His Honor: The banker was not bound to a«k him? Mr Olliviei- : No. The obligation undertaken by the bank was only to pay cheques for which value had been received.

His Honor: If you take that point at all, v-hy not cany it a step further? The money was to be paid for sheep. If the cheques wera given for pigs the banker would not be bound to pay? Mr Ollivier: Clearly. Mr Ilosking: He might bo justified, but he would not be bound.

Mr Ollivier : Assuming a contract had been made, and if it was a contract supported by good consideration, and if it was not open to any of the objections urged against it, it was a contract of very short duration, for it was broken on the afternoon of the day on which it was entered into. It only had an existence of five or six hours.

His Honor : I must toll you that my f?el\ug_ so far is that if an agent goes and says, "I am told to do so-and-so, but I will, with your consent, do something different," and the person he is sent to says, "Do as you Avill," it is not open to the latter to turn round and say the agent had no authority to make a contract; but I was impressed very much at luvercargill by your argument that the contract had been broken.

Mr Ollivier: The contract had a eery limited existence— at most it endured for a few hours. All the cheques camo to hand on that same afternoon. They might not have done so— they might have been held fov days or weeks or have come in at intervals — but they did not do so. It was clear that a person bound by a contract that was not under seal might, before breach, be exonerated from observance by word of mouth without any value for consideration, and this contract between Thompson and Chisholm might havo been waived by the same parties before the return of the cheque.

His Honor : Would it be open to the agent and banker io resolve to undo a contract, tho banker knowing that the original authority had not been carried out?

Mr Ollivier: I am assuming absence of authority in Thompson. His Honor: But Thompson was authorised to go in and pay £1000, and he made an arrangement with tho banker instead of that. Would the bank he allowed to cay it had agreed with the agent, Thompson, to undo the contract?— and then the £1000 had not been paid in, though Thompson had been ordered to pay it in. Mr Ollivier did not contend if the agent was an agent for the making of a contract that he was at liberty to undo the contract. The payment of the £1000 would involve no contract so far as the banker was concerned.

His Honor: Put it this way: The agent was authorised to perform a certain iransaction, and he gets the consent of tho bank to allow him to do something else instead of performing that transaction. Would the bank bo justified in undoing that something he had clone instead, knowing that the original order had not been carried out?

Mr Ollivier: That depended on the extent of the authority vested in Thompson. Learned counsel argued that there was no evidence of assent or intention on Chisholm' s part to the contract; that even if there were a contract made then the contract was made by a person who had no authority to do so and he remained in ignorance of it until after the dishonour of the cheques; that the contract, if any, was a special contract, and not an implied contract, and there was no course of proceedings from which an implied contract could arise ; that by virtue of want of authority there was no consideration; and that th 6 ratification came too late. The whole conduct of Chisholm was inconsistent with such a contract. If there was a contract there was n ) breach, because the obligation was to pay cheques given for sheep,and the plaintiff ought to have identified the cheques which fell within that category; and the plaintiff could not adopt a contract which was no longer in esse. His Honor, at the close of Mr Ollivier' s argument, said he was still of opinion, though tho case had gone so far, that the best course would be that the case should be argued here, liiifi that he should not give judgmeni>—that tho cage should go to the Court of Appeal, where he would like to be one of the court himself. , Mr Hoskmg following on behalf of the de- 1 fendant, maintained that Chisholm was not I conscious that he had entered into an aotive

contract wliicli he was called upon to perform, and no obligation could ariso to communicate his intention not to perform.

His Honor 6aid if what Chisholm did waa to accept warrants in respect of soni" cliques and then when the choqusu fuviv.o •>!, he became alarmed at wbar. "no had u,i^e roxl resolved to take what ho fooVu^.ly i.<iought would be a priiJoiifc r-ouno, ar.u '•( ho did not cash the chequed till the m-.vt <h\y, surely ho ought to have given notice to the person with whom he contracted. Tho jury four-d that Cl.isholm had undertaken to honour the cheques, and if that was so, he did not see how Chisholm could be anything but bound, if he changed his mind and resolved not to honour them, to tell Thompson. Mr Ilosking: If that was so, was his duty in respect to Thompson or Fleming? If his duty was to Thompson, then Thompson n ust sue, and if his duty was to Fleming, when did it ariso. fuf' Fleming did not become bound until ho adopted tho contract. Until Fleming came in and 6aid, " I adopt what Thompson has done," he had a perfect right to say that he wanted the warrants back, even after the cheques were paid. In order that there should be a proper ratification, the matter must be in such a position that tho person ratifying it could liavo made it at the time. There was no acceptance of consideration for a contract until the principal had come in and ratified it. It could not be alleged that on the 6th September, before Fleming was communicated with, there had been consideration, for there was no contract It could only be said that certain forms had been gone into between the banker and the agent, but they did not amount to a contract.

At 5 p.m., Mr Hosking's argument not being concluded, the court rose until 11 o'clock next day.