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Decisions of the Superior Courts of New South Wales, 1788-1899

Hunter v. Maclaren (1843) NSW Sel Cas (Dowling) 416; [1843] NSWSupC 11

banking law, promissory note

Supreme Court of New South Wales

Dowling C.J., Burton and Stephen JJ, 17 October 1843

Source: Dowling, Select Cases , Vol. 7, S.R.N.S.W. 2/3465, p. 201

Where a promissory note is delivered to a bank by its customer, and the note is dishonoured on presentment by the bank; held that the only obligation upon the bank is to notify the customer of the dishonour, in the absence of proof of a contract between the bank and its customer to the contrary.*

This was an action of special assumpsit against the defendant as inspector of the Union Bank of Australia . The first count of the declaration stated that plaintiffs would become customers of the Union Bank of Australia and employ the company in their trade of bankers and would make deposits of their monies and securities and allow them the benefit thereof and would allow them to procure payment for plaintiffs of bills and notes deposited with them. The company promised they would take proper care of them and present such bills and notes to proper persons and at proper places for payment and if dishonored would give due notice of presentment and dishonor to all parties entitled thereto.

Averrment that the plaintiffs had become customers of the company and had employed them as such bankers, that the plaintiffs being possessed of a promissory note made by one G.G. Berrie for £500 payable to one R. Jones, which was by Jones indorsed to Macdermitt and Dixon and by them to I.T. Hughes and by him to plaintiffs who delivered the same to the company to be held and dealt with according to their promise. Breach although the company presented the note to Berrie at maturity, who dishonored it, yet they did not give due notice thereof to any of the endorsers whereby the endorsers have been discharged from liability and plaintiffs prevented from enforcing payment and had been put to the expense of £200 in endeavoring to recover the amount of the note.

Second count stated that in consideration that plaintiffs had employed the company to receive and hold the note mentioned in the first count and present the same to Berrie and in the event of its being dishonored to give due notice of presentment and dishonor to the several endorsers, the company promised to perform their duty in the promises: Averment of a delivery of the note to the company for that purpose. And breach, that though the note was presented by them to Berrie and by him dishonored, yet the company did not perform their duty, but on the contrary thereof gave such an improper and insufficient notice of dishonor to the several endorsers that the same was insufficient for the purpose thereof and the endorsers became discharged from liability and plaintiffs were prevented from enforcing payment and were put to great expense in endeavoring to enforce payment.

Plea 1. That the company did not promise in manner and form. 2. That the plaintiffs did not deliver to the company the promissory notes or either of them to be held and dealt with in manner and form as alleged. Issue thereon.

At the trial before the Chief Justice and a special jury on the 26th May last, it appeared in evidence that the plaintiffs, merchants of Sydney, one of whom was himself at the time of the transaction in question a paid director of the Union Bank of Australia, were customers of the company and were in the habit of depositing bills therewith for collection. The bill in question was put into the bank for collection and not being paid by the maker when due, notice of dishonor was given to the plaintiffs and to the several endorsers but in consequence of the informality of the notice to the endorsers they became released from liability. The form of notice thus given had been the usual form, but since then the company had ceased to give notice of dishonor to endorsers of bills left with them for collection and confined themselves to giving notice to their customers in the following form:

Union Bank of Australia

Take notice that the note left by you for collection at this bank lies due and dishonored. This information is given to you that you may forward such notice to such parties to the note as you wish to hold liable.

The only witness called, namely a clerk in the Union Bank, proved that the imperfect notice given to the endorsers of the bill in question was the usual form of notice at this time and for a considerable time previously given to endorsers of the bill dishonored at the bank. That the bank was in the habit of giving notice of dishonor to endorsers of bills left for collection and that was the usual course of proceeding at the bank, and he stated that if bills were held by the company of the plaintiffs for collection notice would in the course of business be certainly given to the endorsers in the event of dishonor. He proved that the bank paid interest at 4 percent on accounts current and five or seven percent on deposits for a length of time and they made no charge for collecting bills but discounted at 10 percent. In this case the clerk said he gave precisely the same notice to endorsers that he ever did before on bills left for collection.

In support of the action the plaintiffs relied upon the course of dealing between them and the bank to establish an implied contract to give due notice to endorsers of the dishonor of bills deposited with them for collection and rested their case upon the evidence of the bank clerk to support the course of dealings. It might be, it was said, that the notices to which the bank were in the habit of giving were imperfect and insufficient to charge an endorser, yet the fact of their habitually giving such notices to endorsers proved a course of dealing sufficient to establish their liability. The fact of them since adopting another course of dealing in giving notices only to their customers of the dishonor of bills left for collection was an acknowledgment of their previous liability to give due notice of dishonor. For the defendant it was contended first, that by law a banker is bound only to give notice of the dishonor of a bill to the customer who leaves it for collection and not to any other parties. Secondly, that supposing the course of dealing relied upon to establish an implied contract to be satisfactorily proved, it only amounted to proof that the bank was in the practice of giving bad notices and this gratuitously. And third, that at all events as one of the plaintiffs was himself a paid director of the bank, he could not now charge the defendant with liability to which he was himself privy.

The Chief Justice noted that the second count could not be supported upon the principle that the company as mere bankers (for in that capacity only were they charged in that count) the bank was not bound by law to give notice of dishonor to any but their customers and he further ruled that the evidence of the course of dealing did not support the action, it appearing to him that the evidence of the course of dealing was, if anything, to give bad notices and he directed a nonsuit.

Dowling C.J. Last term a motion was made to set aside the non suit on the ground that the case ought to have gone to the jury. On consideration we are of opinion that there ought to be a new trial granted. I confess myself that I was in error in holding that there ought to be a non suit on the ground on which it proceeded. We must take it to be too clear for argument that if the bank was bound at all to give notice of dishonor to endorsers of bills left for collection such notices ought to be good and effectual for the purpose. Therefore the circumstance of the bank having been in the habit of giving bad notices did not affect the question.

We think there is no weight in the argument that because one of the plaintiffs was a paid director of the bank and therefore privy to the course of dealing with this and other notes, the action could not be maintained. There was no partnership privity between the plaintiffs and the bank in this transaction and the right of the firm ought not to be affected by the mere fact of a member of the firm being a director of the bank.

It cannot be doubted that no duty is by law cast prima facie upon their defendants as bankers or collectors to give notice of dishonor to endorsers of bills left for collection; but it is possible that a course of dealing between them and their customers may raise an implied contract to deviate from the ordinary liability of bankers. The promise alleged in the first count of this declaration is founded upon a reason arising out of their employment as bankers, however it promises that in consideration of their employment as bankers, they would do something more than bankers are ordinarily obliged to do, and is a good issue in law if the ground of such liability is satisfactorily made out.

The true question is, whether there was sufficient evidence to go to the jury to support the promise declared upon. We think there was not and if the case had gone to the jury upon the meager evidence produced, the Judge would have been warranted perhaps on directing them to find a verdict for the defendant. The promise declared upon is very large and general. The promise is that the defendants would take proper care of the notes and present them to proper persons and at proper places for payment and if dishonored they would give due notice of presentment and dishonor to all parties entitled thereto.

Now this is a wide and extensive position and seems to cast too great a liability on the defendants as bankers. It imports a general liability to give notice to all endorsers, whether they knew their address or not, where they could be found. It amounts to an undertaking that they will at all hazards take upon themselves the duty of giving notice to persons of whom they are utterly ignorant. If indeed there had been evidence that such was their undertaking they would be bound by it but the evidence produced by the plaintiff fell short of a promise so large and sweeping, and if it had gone to the jury a verdict would probably have been found for the defendant. The clerk examined proved no course of dealing to the extent that the bank under took to give notices to endorsers whose address they did not know. Whether in a new trial the plaintiff can produce evidence to support a declaration so large is another matter. The ground on which we set aside the non suit and award a new trial, is that as there was some evidence to go the jury, it ought not to have been withdrawn from their consideration.

The costs of the former trial to abide the event of the new trial.

Published by the Division of Law, Macquarie University