KEUNEMAN J.—Pope v. Abdulla.467_
1942Present: Soertsz and Keuneman JJ.
POPE v. ABDULLA.93—D. C. Colombo, 2,605.
Bank—Payment of money to Bank—Undials issued to persons living in placeswhere the Bank has other■ branches—Bank in liquidation—Rights ofDepositor.
A merchant, who has to pay money to persons living in towns in Indiain which a Bank has branches, pays to the Colombo Branch a chequecovering the amount to be paid, giving at the same time the names ofthe payees and the -amount to be paid.
Thereafter, the Colombo Branch issued to the payee a draft or undialaddressed to the branch concerned, ordering if to pay on demand, to the-party named or order, the sum indicated.
Held, that, on the failure of the Bank, the merchant was entitled tc-preferential treatment in respect of the sums deposited in connectionwith the drafts.
^ PPEAL from an order of the District Judge of Colombo.
H. V. Perera, K.C. (with him V. A. Kandiah), for petitioners, appellants..
N. K. Choksy for respondent.
Cur. adv. vult.
February 17, 1942. Keuneman J.—
The petitioners are creditors of the Colombo Branch of the Bank in-question, now in liquidation. They claim preferential payment inrespect of various moneys alleged to have been entrusted to the Bank, inconnection with certain drafts or undials and also telegraphic transfers..Admittedly the amounts in question were not paid on presentment atthe proper places, viz., the branch offices of the Bank in various parts ofIndia. The Bank suspended payment shortly after the issue of thesedrafts or undials.
The point to be decided depends upon the nature of these transactions-The law has been correctly stated by the District Judge, and may beshortly set out as follows. If a person pays money into a Bank andnothing further happens, the^money is regarded as the money of theBank, with the obligation super added that the Bank will meet chequespresented to it up to that amount. The relationship created is thatof ordinary debtor and creditor. The position, however, is differentwhere the Bank received money in trust, or in a fiduciary capacity, suchas an agent or bailee, as a result of directions which set out a particularpurpose for which the money is given. In this case, the money does notbecome the money of the Bank to 'use as it pleases, but is earmarked'for the particular purpose, and should not be mixed with the ordinaryfunds of the Bank. The right of the person who gives the money tostheBank to follow this money in the event of the insolvency of the Bankneed not be gone into in this case, but that right is well-established—seeIn re Hallett’s' Estate, In re Knatchbull v. Hallett', and subsequent cases.
. The only question argued in this case is whether the moneys in questionwere received by the Bank in a fiduciary capacity.
• (1879) 13 Ch. D. GH6.
468KEUNEMAN J.—Pope v. Abdulla.
The procedure followed in the present case is as follows :—A merchant,having obligations to pay individuals living in towns in India, wherethe Bank has branches, sends particulars to the Colombo Branch, givingthe place of payment, the name of the payee, and the amount to be paid.With this, the merchant sends to the respondent a cheque covering theamount to be paid, and the commission charged by the respondent—in the present case the cheque given in payment was not drawn on therespondent Bank, but on other Banks. Upon receipt of the money,the Colombo Branch immediately makes an entry in its books, debitingitself and crediting the branches concerned. Thereupon, Colombo issuesto the payee a draft or undial, addressed to the branch concerned, orderingit to pay, on demand, to the party named by the payee or order, the sumindicated. The witness, George, who was himself an accountant underthis Bank, and familiar with the practice, added : “ When we issue a draftto the party it shows that the money has left this branch. So that it isno longer here but in the Madras books as money received.” The moneyis not, however, in fact remitted, but the accounts of the various branchesare subsequently reconciled by the Head Office. Colombo then advisesthe branch in question of the issue of the draft. The branch whcreceives this advice thereupon debits Colombo, and credits “ the draft
payable account ”. George adds : “ There will be a credit entry in the
Madras branch in the name of the purchaser ”, i.e., in the name of theperson who has paid the cheque and taken out the draft. Colombo alsoadvises the branch in question of the name of the person to whom themoney is to be paid. George stated :“ The moment we issue a draft,
that draft is purchased from us on the footing that our branch whereverit may be will pay him or the person he orders to be paid the amountdue on that draft, according to its tenor ”, A commission is chargedon every draft that is given.
Apart from the draft, another procedure is adopted, when expeditionis desired. This is called the telegraphic transfer. In this case, no draftis issued, but the payee is given a receipt for the amount paid. Colombothen wires to the branch in question, and undertakes the responsibility ofpaying the person named in the advice. Commission is also charged inrespect of this transaction.
The learned District Judge was of opinion that, in the case of the draft,the transaction was nothing more than a purchase of the draft by thecustomer, and that this is an ordinary banking transaction. He appearsto have regarded the telegraphic transfer also as producing the samerelationship between the parties, viz., that of debtor and creditor. But,in my opinion, the evidence goes much further than that, and amountsto an understanding or agreement between the parties that the money isreceived by the Bank for the purpose of transmission to the appropriatebranch for the special purpose of paying the person named in the adviceor his order. Mr. Choksy, for the respondent, argued that, even if thisWas the case, the issue of the draft to the payee alters the relationshipof the parties,, and puts them in the position of debtor and creditor.He appears to concede that the position is different in the case of the
telegraphic transfer. He argued that, in the case of the issue of a draft,the position was akin to that of the Bank giving a promissory note to the
Abeysirigoonewardene v. Abeysirigoonewardene:469
payee, and therefore merely constituting itself a debtor to the payee.But I do not thinkthis isthe true position.No doubt, as far as the
payee is concerned,he cantreat the draft either as a bill ofexchange
or a promissory note, and, further, there is evidence that a draft of thiskind can be negotiated. But it has not been shown that the issue ofthe draft affects in any way the relationship 'between the payee and theBank. I do not think it amounts to more than the creation of a conve-nient means of collecting at the other end. The draft does not in itselfconstitute the Banka debtor of the payee.In the event ofthe draft
being unpaid at theproperplace of payment,the right of thepayee, as
against the Bank, is what it had been at the commencement of thetransaction.
I think that the order of the District Judge is wrong, and allow theappeal with costs. I make order that the petitioners are entitled topreferential payment in respect of the sums deposited in connectionwith the drafts and telegraphic transfers dealt with in the District Judge’sorder. All costs will be payable out of the assets in the hands of theliquidator.
Soertsz J.—I agree.
POPE v. ABDULLA