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. 2 - 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. 3 - 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- al 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- 5 ^ a v e Murphy's account was £118,406 in credit. • Notwithstanding this credit, the local Manager a nd the General Manager of the Eastern Bureau o f the Bank of Ireland took it upon themselves t( j> decide that, as Palgrave Murphy had no al leged overdraft, cheques to the value of £93,983, re presenting their supposed overdraft, would have to be dishonoured and returned unpaid. Amongst the cheques picked for dishonour and return was 6 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 v. Bank of Ireland —Hamilton J—unreported—18th December, 1974.] 108