Marshall v Colonial Bank of Australasia Ltd [1904] HCA 31

Marshall v Colonial Bank of Australasia Ltd [1904] HCA 31

As between banker and customer, there is no absolute and unqualified duty on the part of the customer, in drawing a cheque, to take precautions against forgery. The mere fact that a cheque contains blank spaces before the amount in words or figures is insufficient evidence of such breach of duty as to give rise to estoppel or liability if a third party fraudulently increases the amount and induces the bank to pay the larger sum. To estop the customer, there must be more than the existence of blank spaces; there must be conduct amounting to authority or active misrepresentation. Decision of the Full Court reversed.

Parties
Appellant; Plaintiff: W. L. Marshall; Appellant; Plaintiff: H. J. Day; Co Executor; Defendant: R. Myers; Respondent; Defendant: The Colonial Bank of Australasia Ltd.
Jurisdiction
Australia
Judgment Date
27 October 1904
Procedural Posture
Appeal / Appeal From the Full Court of Victoria to the High Court of Australia
Outcome
Appeal allowed
Legal Topics
Banker and Customer Relationship, Negligence in Cheque Drawing, Fraudulent Alteration of Cheques, Estoppel, Allocation of Loss Due to Forgery
Banking Law Contract Law Banker and Customer Relationship Negligence in Cheque Drawing Fraudulent Alteration of Cheques Estoppel Allocation of Loss Due to Forgery

Case Brief

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Parties

W. L. Marshall

Appellant; Plaintiff

H. J. Day

Appellant; Plaintiff

R. Myers

Co Executor; Defendant

The Colonial Bank of Australasia Ltd.

Respondent; Defendant

Procedural Posture

Appeal / Appeal From the Full Court of Victoria to the High Court of Australia

Legal Issues

  1. 1 Whether the customer (drawer of a cheque) owes an absolute or qualified duty to take precautions against forgery in drawing cheques
  2. 2 Whether negligent drawing of cheques by a customer disentitles them from recovering funds paid out by the bank due to a fraudulent alteration by a third party
  3. 3 Whether the mere presence of blank spaces on a cheque amounts to a breach of duty or negligence sufficient to estop the customer from claiming against the bank

Ratio Decidendi

As between banker and customer, there is no absolute and unqualified duty on the part of the customer, in drawing a cheque, to take precautions against forgery. The mere fact that a cheque contains blank spaces before the amount in words or figures is insufficient evidence of such breach of duty as to give rise to estoppel or liability if a third party fraudulently increases the amount and induces the bank to pay the larger sum. To estop the customer, there must be more than the existence of blank spaces; there must be conduct amounting to authority or active misrepresentation. Decision of the Full Court reversed.

Court Disposition

Appeal allowed

Orders

  • Judgment for the appellants with costs