The Gazette 1975

Bank negligent in mistakenly finding overdraft due and

returning cheque.

L On 26th March, 1974, Palgrave Murphy Ltd. drew

a cheque on their account of the O'Connell Bridge

Branch of the Bank of Ireland payable to the

plaintiffs for £18,130. The plaintiffs duly lodged

this cheque

inter alia

to their account in the College

Green Branch of the Bank of Ireland on 7th April,

1970, and the amount of the cheque was credited

to plaintiff's current account. On the 14th April,

1970, the plaintiff received from the College Green

Branch a statement verifying this.

- From 2nd March, 1970, the members of the Irish

Bank Officials Association gave notice that they

would be working restricted hours in all banks

of the Republic. The Irish Banks Standing Com-

mittee notified customers that it might not be

possible for Banks to clear cheques in the usual

way. As a result of the industrial action of the

bank employees, serious arrears in the clearance

of cheques accumulated in March and April, 1970.

Finally notice was given that all banks would be

closed as from 1st May, 1970. Consequently the

cheque issued by plaintiff had not been cleared

through the Central Clearing House and forwarded

to his own Branch, the O'Connell Bridge Branch.

Work was only resumed in the Banks on 21st

October, 1970.

- Between 8th May, 1970, and 17th July, 1970, the

plaintiff accepted cheques from Messrs. Palgrave

Murphy in the sum of £130,582 in respect of

services rendered.

On 1st May, 1970, there was standing to the credit

of Palgrave Murphy in the O'Connell Bridge Bank,

a sum of £143,900. Because of the accumulation

of arrears inside the banking system, amounting

to 2 million items, agreement was reached between

the Banks that 1st May, 1970 would be the day for

presentation and payment of all these items. When

eventually the factual position of each customer's

account would be ascertained, the manager of the

Paying Bank would make the decision as to which

cheques would be paid out and which cheques

would be returned at his discretion. When eventu-

ly all the cheques drawn upon Palgrave Murphy

were posted to the account and the factual position

ascertained, it'was found that, although Palgrave

Murphy had no authorised overdraft, their account

J^as in fact overdrawn to the extent of £93,983.

In fact an error had been made, and Messrs. Pal-

a v

e Murphy's account was £118,406 in credit.

• Notwithstanding this credit, the local Manager

nd the General Manager of the Eastern Bureau

o f

the Bank of Ireland took it upon themselves

j> decide that, as Palgrave Murphy had no

leged overdraft, cheques to the value of £93,983,

presenting their supposed overdraft, would have

to be dishonoured and returned unpaid. Amongst

the cheques picked for dishonour and return was

that for £18,130 payable to the plaintiff.

t he cheque for £18,130 was stamped "Refer to

Drawer" and branded "Paid in error". It was then

returned to the College Green Branch of the Bank

of Ireland. This fact was notified to the plaintiff

by letter of 16th November, 1970.

7. As a result the plaintiff took proceedings seeking

(1) a declaration that the defendants had wrong-

fully and negligently debited the plaintiff's account

with the said sum of £18,130 on 16th November,

1970; (2) an order directing the defendants to

credit the plaintiff's account with said sum of

£18,130 with effect from 16th November, 1970;

and (3) damages for negligence and breach of

contract.

Hamilton J. held:

(1) that the mere furnishing by the defendant to the

plaintiff of an account on 14th April, 1970, in

which this cheque is shown as having been

credited to plaintiff's account did not, in view of

the notices then prevailing, amount to a repre-

sentation that the cheque had in fact been paid;

(2) That the cheque for £18,130 drawn upon Palgrave

Murphy at O'Connell Bridge Branch of the Bank

of Ireland dated 26th March, 1970, payable to the

plaintiff was never in fact paid by the said Bank;

(3) That the O'Connell Bridge Branch and the College

Green Branch must be treated for this action as

separate and distinct entities;

(4) That the College Green Branch as Collecting

Banker owed a duty to the plaintiff to use reason-

able skill, care and diligence in presenting payment

of the cheque and planning the proceeds thereof

of the customer's account;

(5) that the O'Connell Bridge Branch as paying banker

had no privity of contract with the plaintiff;

(6) Nevertheless the ordinary Law of Negligence

applies to Banks whether as Collecting Agents or

paying Agents. Their duty to use reasonable care

and skill extends beyond their actual customers;

(7) As the cheques received by the Central Clearing

House prior to closure had been segregated in

daily batches from the remitting Banks and

branches, the normal practice of posting to the

customer's account cheques in the order of pre-

sentation was not followed. Instead, payment of

cheques was held in abeyance until the final

position of the account had been ascertained. The

defendants acquiesced and acted upon this

decision;

(8) The nature of the duty owed by the defendants

to the plaintiff was to exercise reasonable skill,

care and diligence in securing payment of the

cheque; this they negligently failed to do by giving

wide discretion to the Manager of the paying

Bank. The Manager decided that the cheques to

be returned should be selected at random and this

was done. His action in so picking the cheques for

return cannot be regarded as the exercise of

reasonable care. Consequently the Paying Banker

acted negligently and in breach of duty towards

the plaintiff. The Court will direct an inquiry as

to the damage sustained by the plaintiff and will

order payment of the amount due.

[Dublin Port and Docks Board

Bank of Ireland

—Hamilton J—unreported—18th December, 1974.]

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