COLLECTING BANKER’S

STATUTORY
PROTECTION
Section 85
 In practice, it has been found that the defences
available to a collecting banker at common law did
not provide the banker with much protection
 S. 85 of the BEA provides statutory protection
to a banker when he collects an instrument for a
customer in which the customer has no title or a
defective title
 One of the objects of s. 85 is to relieve a banker
from the burden of having to examine the
indorsements on instruments presented to him for
collection
 A banker is not to be treated as having been
negligent by reason of his failure to check the
indorsements on an instrument presented for
collection
 S.85 also covers any instrument issued by a
customer which though not a bill but the
exchange is intended to enable a person to obtain
payment from a banker
 Thus, it covers a cheque which is made payable to
‘cash’. It is not a bill of exchange because no
payee is specified on the instrument. So, a banker
who collects it is given protection under s.85(2)
(b).
 The same applies to a bank draft
 S. 85 – banker collects a cheque in good faith
and without negligence
 S.85 does not protect a banker when he collects a
cheque which is materially altered as well as a
forged cheque
A banker collects a cheque for a
customer
 Lacave &. Co v. Credit Lyonnais
a bank collecting a cheque was not entitled to
statutory protection under BEA unless it colected
the cheque for a customer and the term customer
referred to a personwho kept an account with the
bank
 Great Western Railway Co. Ltd v. London &
County Banking Co. Ltd
the presence of a bank acc constituted an
important factor to be taken into consideration in
deciding whether a person was a customer of the
bank
 Standard of care

 S. 85 does not lay down any specific standard of

care
 Comm of Taxation’s case, Lord Dunedin
- it must be the standard to be derived from the
ordinary practice of bankers, not individual
 The practice changes from time to time
 Also varies from country to country
 National City Bank of New York’s case
-…expected to act with reasonable care, not
expected to be an amateur detective
 A duty to verify the
identity of a customer

• Significant differences among

countries – England, S’pore & M’sia
• Local conditions and circumstances
have to be taken into account in
ascertaining the ordinary standards
of a banker
 Casual link btwn negligence in
opening an acc and negligence in
receiving payment

 EG: a cheque falls in the hand of a thief.

If a bank opens an acc for the thief w/out
verifying his identity there is an obviuos
casual connection btwn negligence in
opening an acc and negligence in receiving
payment on the stolen cheque
 Ladbroke & co. v. Todd
 Rubber Industry (Replanting) Board’s case
Fact: pltf issued cheque to Toh Whye Teck-sent by
post-fell in the hand of LMC-present the cheque to
the bank-open an acc for Chop Toh Waye Teck-no
inquiry was made-business reg cert was a forgery-
pltf brought an action for conversion
Held: when there’s a casual link btwn the negligence of
a bank in opening an acc for a customer and the
subsequent collection of a stolen cheque, the bank
was not entitled to stat protection under s.85 of
BEA ‘49
 A duty to make proper inquiry

 Cheques belonging to a company

Hannan’s Lake View Central Ltd’s case
Underwood Ltd’s case
 Cheques belonging to a partnership
Tan Ah Sam v. Charted Bank
 Cheques made payable to a sole
proprietorship
Smith & Baldwin v. Barclays Bank Ltd