T.E. Potterton Ltd v Northern Bank Ltd

JurisdictionIreland
JudgeO'Hanlon J.,
Judgment Date01 January 1993
Neutral Citation[1992] IEHC 3
CourtHigh Court
Docket Number[1986 No. 7503P],No. 7503P/1986
Date01 January 1993

[1992] IEHC 3

THE HIGH COURT

No. 7503P/1986
POTTERTON v. NORTHERN BANK LTD

BETWEEN

T. E. POTTERTON LIMITED
PLAINTIFF

AND

NORTHERN BANK LIMITED
DEFENDANT

Citations:

DUBLIN PORT & DOCKS BOARD V BANK OF IRELAND 1976 IR 118

BILLS OF EXCHANGE ACT 1882 S74

BILLS OF EXCHANGE ACT 1882 S79(2)

HARTS LAW OF BANKING 4ED 340

HALSBURY'S LAWS 4ED V2 PARA 163

BANK OF ENGLAND V VAGLIANO BROS 1891 AC 107

BANK OF IRELAND V SMITH 1966 IR 646

HEDLEY BYRNE & CO LTD V HELLER & PARTNERS LTD 1964 AC 465

ROBINSON V NATIONAL BANK OF SCOTLAND 1916 SC 154

MCMAHON & BINCHY IRISH LAW OF TORTS 2ED

COURTS ACT 1981

Synopsis:

BANKER

Negligence

Cheque - Payment - Reason - Misstatement - Payee - Loss - Liability of banker - (1986/7503 P - O'Hanlon J. - 19/6/92)

|T.E. Potterton Ltd. v. Northern Bank Ltd.|

NEGOTIABLE INSTRUMENTS

Cheque

Dishonour - Banker - Duty - Payee - Loss - Liability of paying bank - Reason stated for returning cheque unpaid - Negligent misstatement - Damages - (1986/7503 P - O'Hanlon J. - 19/6/92)

|T.E. Potterton Ltd. v. Northern Bank Ltd.|

NEGLIGENCE

Banker

Cheque - Payment - Refusal - Reason - Misstatement - Payee - Loss - Liability of banker - (1986/7503 P - O'Hanlon J. - 19/6/92)

|T.E. Potterton Ltd. v. Northern Bank Ltd.|

1

Judgment delivered by O'Hanlon J., the 19th day of June, 1992.

2

The Plaintiff Company carries on business in auctioneering and livestock sales, with marts at Trim and Delvin, Co. Meath, and mart sales are held at Delvin on Thursday of each week. Liam McMahon, carrying on business through the medium of a limited liability company, Tansey Farms Limited, with farms at Roslea, Co. Fermanagh, and near Clones, Co. Monaghan, was a purchaser of cattle at the Plaintiff's marts for several years leading up to the year 1985 and throughout that year. At the relevant times, such purchases of cattle were paid for by means of cheques drawn upon the account of Tansey Farms Limited with Northern Bank Limited, The Diamond, Clones, Co. Monaghan.

3

At a sale held by the Plaintiff on the 28th November, 1985, the said Liam McMahon acting on behalf of his company, Tansey Farms Limited, purchased cattle to the value of £39,983 and gave in payment therefor a post-dated cheque drawn on the Defendant Bank for that sum, and bearing date the 6th December, 1985.

4

The said cheque was presented for payment by the Plaintiff to its own bank, Ulster Bank Limited, on the 4th December, 1985 and was sent on for clearance to the Defendant Bank but was returned by the Defendant Bank on the 9th December, 1985, marked "Refer to Drawer Present Again Alteration req's drawer's conf." (being shorthand for "Alteration requires drawer's confirmation").

5

The cheque was again presented for clearance on the Plaintiff's behalf by the Plaintiff's bank, Ulster Bank Limited, without alteration and without seeking drawer's confirmation of any part of the writing on the cheque, on the 12th December, 1985, and on this occasion it was returned by the Defendant bearing the original words, "Refer to drawer" and "Alteration req's drawer's conf." but with a line drawn through the words "Present Again" which formed part of the original message when the cheque was first returned.

6

Mr. Edward Potterton, a director of the Plaintiff Company, said they were not too concerned when the cheque came back a second time. He contacted Mr. McLoughlin, Manager of the Clones Branch of the Defendant Bank and was told by him that he should go and see Mr. Liam McMahon. He did so, and was told by him that "there was a problem". In the meantime a further consignment of cattle had been sold to Tansey Farms Limited on the 5th December and were paid for by cheque dated the 13th December, 1985, which was handed to the Plaintiff on the 6th December, 1985. The amount involved in this case was £13,298 and on being presented for payment it was returned marked "Refer to Drawer".

7

The Plaintiff Company never received any payment on foot of either cheque. Proceedings were instituted against Tansey Farms Limited on the 23rd December, 1985, and judgment was obtained against them in May, 1986, but the Company went into liquidation in July, 1986, and nothing was ever recovered on foot of the judgment. In this situation the present proceedings were commenced against the Defendant claiming that the loss which had been sustained by the Plaintiff was attributable to negligence and breach of duty on the part of the Defendant in the manner in which it had dealt with the cheque dated the 6th December, 1985, which was presented to it for payment on or about the 9th December, 1985, and arising out of its refusal or failure to clear same within a reasonable period of time.

8

The Defendant denies that it was guilty of any negligence or breach of duty and denies that it owed any duty of care to the Plaintiff in the circumstances of the present case. There is a plea that no loss or damage was caused to the Plaintiff by the matters alleged against the Defendant and a plea that even if there was negligence on the part of the Defendant (which is denied) the Plaintiff was guilty of contributory negligence.

9

Edward Potterton, in the course of his evidence, claimed that the Defendant, during the critical period spanning the early weeks of December, 1985, actually paid out sums in the region of £80,000 on foot of cheques presented for payment against the Tansey Farms Ltd. account during that period.

10

Mr. McLoughlin, Manager of the Clones Branch of the Defendant Bank at the time, said that in 1985 Tansey Farms Ltd. had permission to overdraw their account up to a limit of £40,000. More latitude than this was allowed from time to time when the company was able to show that there were payments to come in which could be relied upon to arrive, such as VAT and MCA credits. Mr. McMahon had a practice of telephoning the bank on a weekly basis to ask what cheques had come in for payment and to inform the bank what was due to the company from the meat factories. "Depending on their assurances we would pay or send them back", Mr. McLoughlin said.

11

He said that the cheque for £39,983 in favour of the Plaintiff came in on Friday, 6th December, 1985. Two other cheques came in on the same day (or on the previous day) - one for about £17,000 and one for about £3,000. As the account could not meet them all, they were held over until the following Monday. Two cheques which had come in on Thursday were held over and paid on the Friday.

12

The witness then said (contrary to his earlier evidence) that the cheques held over to Monday were four in number - for the following amounts - £39,983; £37,642; £3,956; £340. A decision was taken to pay the three smaller amounts and to return the largest cheque with two separate indorsements. He said that the indorsement "Refer to Drawer - Present Again" should have conveyed to the Plaintiff that there were insufficient funds in the account to meet the cheque. By the time the cheque was again presented for payment around the 12th or 13th of December a flood of cheques had come in; funds were still insufficient; the words "Present Again" were struck out and the cheque was returned marked "Refer to Drawer Alteration req's drawer's conf." He explained that the last part of the message referred to the fact that one of the words on the cheque, being the word "Nine", was written in block or printed letters whereas the other words were in ordinary script.

13

Mr. Anderson, who was Assistant Manager at the time, said that the cheque for £39,983 came in on the morning of Friday 6th December, and if paid at that time would have put the account £9,000 beyond the permitted overdraft limit of £40,000. A decision was taken to pay the two smaller cheques, in accordance with normal banking practice.

14

A number of matters arise for consideration in relation to the issue of liability in the case. In the first place I have to consider whether there was any justification for returning the cheque uncashed on the basis that it contained an alteration which could reasonably be said to have required the drawer's confirmation before it would be safe for the drawer's bank to cash it.

15

In my opinion there was no justification for returning the cheque uncashed on this basis. The word "nine" is, in fact, written in block letters and the other words in ordinary script, but it has all the appearance of having been written at the same time, and with the same writing instrument, and by the same hand as all the rest of the writing on the cheque.

16

Furthermore, evidence was given by John Pearson, a farmer who dealt with Tansey Farms Limited, and likewise by Liam McMahon, of Roscommon Co-Op. Marts Ltd., who also had dealings with that company, each of whom had received cheques from the company in which the same word, "nine" had been written in block letters with the remaining words in ordinary script, on earlier dates in 1985, and which had been cleared by the Defendant Bank without question, on being presented for payment.

17

I have come to the conclusion, on the evidence in the case, that the query raised by the Defendant about an alteration requiring drawer's confirmation was merely a device invented to extricate the Defendant from an awkward situation where more cheques were coming in for payment than the account could meet yet they were unwilling to formally dishonour their customer's cheques because of their belief, (based on previous experience) that they were likely to be put in funds if more time were given for the purpose.

18

I believe that Tansey Farms Limited had been allowed to operate their account in a rather flexible manner for a considerable period prior to the final collapse of the company but there was always a danger that the latitude given by the bank might ultimately result in prejudice to the creditors of the company.

19

I do not accept the proposition put forward by the bank...

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