HATTON NATIONAL HANK
COURT OF APPEALWIGNESWARAN, J.
C. COLOMBO 13895/MRSEPTEMBER 07. 2000NOVEMBER 10, 2000
Wrongful dishonour of cheque – Liability of Bank ■ Duty of care – Damages- Not limited to actual pecuniary loss – Substantial damages – To beproved.
The Plaintiff Respondent Instituted action against the Defendant AppellantBank claiming damages for the return of the cheque for Rs. 35.000/= bythe Bank, with the endorsement 'Exceeds Arrangement’ despite adequatefunds being available in the said account.
The Defendant Appellant Bank accepted that they had mistakenlydishonoured the aforesaid cheque.
The District Court awarded Rs. 750,000/= as damages with interest.Held :
Wrongful dishonour of the customer's cheque makes the Bank liableto compensate the customer on contractual obligations as well as forinjury to his creditworthiness. A return of a cheque would causeinjury to the drawers reputation.
Quantum of Damages is not limited to the actual pecuniary losssustained by reason of such dishonour. When the customer Is a traderhe is entitled to claim substantial damages even if he had suffered noactual pecuniary loss sustained by such dishonour, if he can showthat his creditworthiness had suffered by the dishonour of the cheque.
(Hi) A non trader is not entitled to recover substantial damages unless thedamage he has suffered is alleged and proved as special damages,otherwise he would be entitled to nominal damages.
(iv) The Plaintiffs evidence on the transaction was vague, nebulous andindeterminate and further he had not proved any actual or special
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damages, unless special damages are claimed and proved nominaldamages will be awarded.
APPEAL from the Judgment of the District Court of Colombo.
Cases referred to :
Gibbons u. Westminister Bank – 1939 3 All ER 577
Harris u. Amery – LR 1 CP 148
Luna Park (NSW) Ltd., u. Tramways Advertising Pte Ltd.. – 193861 CLR 286
Evans v. London and Provincial Bank – 1917 3 LDAB 152
A. Parathalingam PC., with L. B. J. Peiris for Defendant – Appellant.S. J. Mohldeen for Plaintiff – Respondent.
Cur. adv. vult.
January 16, 2001.
SHI RANEE TIL AKAWARDANE, J.This Appeal had been preferred by the Defendant Appellantagainst the Judgement of the Additional District Judge, Colombodated 30. 09. 1997 wherein he had held in favour of the Plaintiff,awarded a sum of Rs. 750,000/- as damages with interest untilfull payment and costs.
The Plaintiff instituted action against the Defendant claimingdamages for the return of the cheque bearing No: 210236 (P2)for a sum of Rs. 35,000/- by the Manager of the KirillaponeBranch, with the endorsement "exceeds arrangements," despiteadequate funds being available in the said account.
The Defendant Bank accepted that they had mistakenlydishonoured the aforesaid cheque. The Bank explained thatthe error had occurred due to the increase of the overdraftfacility that had been afforded to the Plaintiff. Originally, on05. 10. 1992 the limit of the overdraft as against the security ofa savings deposit of Rs. 100,000/- was limited to Rs. 73,000/-but thereafter on 01. 12. 1992 as against the security of a savingscertificate of Rs. 250,000/- it was increased by an additional
Hatton Natonal Bank v. Tllakaratne
(Shlranee Ttlakawardane, J.)
183,000/-. When the cheque was presented according to theentries of the Bank at 12.26 p.m. on 29. 12. 1992, encashmenthad not been approved as the records of the Bank had mistakenlyreflected that overdraft facility had been increased toRs. 183,000/-, when in fact it had been increased toRs. 256,000/- (Rs. 73,000/- + Rs. 183,000/-). The Bank hadomitted to take into account the total credit balance of thePlaintiff. When appraised of their error the Bank had intimatedto the Plaintiff customer that the cheque could be presentedagain. However the Plaintiff had issued a fresh cheque No:210237 (PI) for the same amount and that cheque had beenpresented at 1.45 p.m. and had been immediately encashed.
It is common ground that the cheque was originallydishonoured allegedly due to a bona fide error of the DefendantBank. There is no gainsaying that upon its contractualobligations the Bank has a duty of care to its customers andthis duty must be performed without negligence. Such a duty ofcare is an implied term of the Banking contract. According tothe particulars relevant to this case the matter to be determinedis the consequences of the wrongful dishonour of the cheque.
Wrongful dishonour of the customer's cheque makes theBank liable to compensate the customer on contractualobligations as well as for injury to his creditworthiness. Thereis no doubt that a return of a cheque would cause injury to thedrawer's reputation.
In so far as the damage to goodwill of the business of thePlaintiff, there is no evidence except the Plaintiffs merely say so.No other evidence to support such damage had been led.Although he had said that other traders were not inclined todeal with him, no evidence to support this allegation of his wasplaced before the District Court. Loss of reputation in any event,even according to his own evidence was confined to the brokerand bears no nexus to the goodwill of other traders. Thereforethe fact that the Bank had failed in its duty of care has beenproved by the Plaintiff, but not the quantum of damages.
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In considering the question of the quantum of damages, itis not limited to the actual pecuniary loss sustained by reasonof such dishonour. When the customer is a trader he is entitledto claim substantial damages, even if he had suffered no actualpecuniary loss sustained by such dishonour, if he can showthat his creditworthiness had suffered by the dishonour of thecheque. But a non-trader is not entitled to recover substantialdamages unless the damage he has suffered is alleged andproved as special damages. Otherwise he would be entitled tonominal damages. (Gibbons u. Westminster Bank
A trader is defined as a person who lives by buying andselling merchandise. A 'business' has a more extensive meaningthan the word 'trade' (per Willis J. in Harris u. Amery121 – cited inStroud's Judicial Dictionary 5th Ed. Page 323)
According to the Plaint dated 29. 09. 1993, the claim fordamages was based on the Plaintiffs assertion that he was abusinessman who dealt with both local and foreign clientele,and that his dealings were established on the basis of his goodwilland creditworthiness. By the aforesaid dishonour, his goodwilland creditworthiness had been tarnished, and furthermore thathis reputation amongst the business fraternity as well as societyhad been affected.
The evidence the Plaintiff led regarding his "business" washis own testimony. He asserted that he originally ran anemployment agency. This did not make him a trader. He statedthat he was thereafter in the Tea trade and Garment industry,but qualified it with the assertion that it was in the capacity of aDirector in 3 such establishments.
However, he later described himself as an "exporter" andthat the cheque was given to a broker Mr. Perera. The Plaintiffwas emphatic that the broker had informed him that the factoryowners had wanted payment to be made before 12.00 o'clock
Hatton Natonal Bank v. Ttlakaratne
(Shlranee Ttlakawardane. J.)
(vide page 93 of the record.) Mr. Perera's presentation of thecheque to the Bank which had been recorded at 12.26 p.m., a• fact that was not even challenged therefore remains inexplicable.When PI was finally encashed at 1.45. p.m. Mr. Perera'sacceptance of the Rs. 35,000/- in cash (page 91 of the record),when he had already been communicated the finality of thedeadline, was even more puzzling. In any event if the transactionhad been so definitely to be concluded before noon and suchwas within the knowledge of the Plaintiff, the reissue of thecheque P2 and the handing over of the cash to the Broker afterthe fixed time cannot be logically resolved.
Most significant also was the failure of the Plaintiff to callMr. Perera who had been listed as a witness, (Vide list of witnessesdated 01. 09. 1994). This witness's evidence would have beenuseful to establish the enormous loss of almost 2 million whichhad been allegedly suffered by the Plaintiff due to other Traders"dishonouring" cheques issued by him, pursuant to thisincident. Furthermore, though the plaintiff had undertaken tocall one Mohideen as a witness to testify to his loss, he failed toact in terms of this undertaking.
As regards the transaction itself, the evidence given by thePlaintiff with regard to the actual transaction was vague. ThePlaintiff could not describe the designs of the jacket nor thequantity ordered. Documents were not produced, nor were anyspecific details of any part of the transaction elicited in evidence.The Plaintiff specifically stated that the jackets were to be sentfor sale as winter clothes for December 1992. P2 according tothe Plaintiff was a deposit for the exportation of the said wintergarments. Assuming that the cheque P2 dated 29. 12. 1992was a deposit as described by the Plaintiff, the jackets certainlywould not have reached the seller in time for winter sales duringDecember 1992. It is improbable and unlikely that theexportation of winter jackets for sale in December would havebeen transacted in order that the jackets would reach the sellerafter December. The evidence given regarding the transactionfor which the cheque had been issued therefore does not bear
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up to close scrutiny, especially regarding any specific details ofthe transaction itself. The Plaintiffs evidence on the transactionitself was vague, nebulous and indeterminate.
The Plaintiff had also not proved any actual or specialdamages by reason of wrongful dishonour of the cheque. Unlessspecial damages are claimed and proved nominal damages willbe awarded. (Luna Park (NSW) Ltd. u. Tramways AdvertisingPty. Ltd131 Evans v. London and Provincial Bankw).
In assessing the quantum of damages, in the caseof Gibbons v. Westminster Bank Ltd. (Supra) approximatelyl/4th of the valus of the cheque was given as nominal damages.The nominal damages of injury to reputation, due to thedishonour of the cheque presented by the broker, wouldaccording to the facts of this case amount of Rs. 8,750/-.
This is specially so as the Plaintiff had led no evidence toshow that the effect of the dishonouring of the cheque wentbeyond the broker.
In all these circumstances, we set aside the Judgment ofthe Additional District Judge, Colombo dated 30. 09. 1997 inso far as the quantum of damages that had been awarded andaward damages in a sum of Rs. 8,750/-. The Appeal is dismissedsubject to this Variation to the sum awarded as damages. Wemake no order as to costs.
WIGNESWARAN, J. – I agree.
Quantum oj damages reduced.