#6641 - United Australia V. Barclays Bank - Commercial Remedies BCL

United Australia v. Barclays Bank

Facts

A company called Lower Ancobra (Gold Coast) Areas, Ld., owed the appellants a sum of 1900l., and in payment drew a cheque for that amount making it payable to the appellant company or order. The appellant company had a secretary named Emons, who had authority to indorse cheques for the purpose of paying them into the appellant company's bank account, but had no authority to indorse cheques specially on behalf of the appellant company for the purpose of enabling payment to be made to a third party. Emons, purporting to act on the appellant company's behalf, specially indorsed the cheque so as to make it payable to the M. F. G. Trust, Ld., of which Emons was a director. Thereupon M. F. G. indorsed the cheque and paid it into its account at the respondent bank. The respondent bank knew that Emons, besides being secretary of the appellant company, was a director of M. F. G., but without making any enquiries the bank collected the proceeds of the cheque and placed them to the credit of M. F. G.'s account.

Proceedings by the appellant against MFG: On May 13, 1935, the appellant company issued a writ against M. F. G. claiming the 1900l. as "money lent," or alternatively as "money had and received" by M. F. G. to the use of the appellant company. It will be observed that the appellant company at the time had no knowledge of the cheque, or of how any such cheque had been dealt with by the respondent bank. On October 28, 1935, on the petition of another creditor, a winding-up order was made against M. F.G. The action by the appellant company against M. F. G. was thereupon automatically stayed before trial and no judgment was ever obtained.

On December 10, 1935, the appellant company signed an affidavit of proof of debt in the liquidation of M. F. G. stating that M. F. G. was indebted to the amount of 1900l. to the appellant company for money lent or money had and received, but this proof was never admitted. There was thus never any recovery, either by judgment or otherwise, of any part of the sum claimed from M. F. G.

Proceedings by the appellant against the Bank: By writ issued on November 8, 1937, the appellant company sued the respondent bank for (1.) damages for conversion; (2.) alternatively, damages for negligence; (3.) in the further alternative, for 1900l. as money had and received by the defendants to the use of the plaintiffs.

Question

The question to be decided in this appeal is whether the proceedings against M. F. G., carried on up to the point that they in fact reached, constitute a valid ground of defence for the respondent bank and so relieve it in the present action from a liability, which would otherwise certainly attach to it, to repay to the appellant company the sum of 1900l. of which they had been deprived and which they have not received from any other source.

Holding

Lower Court’s ruling

The view taken by the Courts below is that the appellant company, by bringing their action against M. F. G., elected to "waive the tort" and thereby became irrevocably committed, even against a different defendant, to the view that Emons was, as he professed to be, duly authorised as the appellant company's agent to deal with the cheque as he did. If so, the Bank's dealing with the cheque was not tortious and the present action would fail.

Effect of “Waiving a Tort”

Where "waiving the tort" was possible, it was nothing more than a choice between possible remedies derived from a time when it was not permitted to combine them or to pursue them in the alternative, and when there were procedural advantages in selecting the form of assumpsit. For example, there were no pitfalls in drawing the declaration in assumpsit, and the cause of action did not drop with death; on the other hand, there were advantages for the defendant, too, for an action framed in assumpsit permitted the defendant to plead the general issue (Stephen's Principles of Pleading, 2nd ed., 1827, p. 197).

When does waiver operate?

It will be observed that Holt C.J. does not say that the commencement of an action in one form bars the possibility of recovery under another form of action; even against the same party, the bar only arises in his view, at earliest, on recovering judgment.

“Waiver” does not waive the cause of action

This review of the authorities convinces me that the oft-quoted dictum of Bovill C.J. in Smith v. Baker is wrong. There is, as far as I can discover, no reported case which has ever laid it down as matter of decision that when the plaintiff "waives the tort" and starts an action in assumpsit, he then and there debars himself from a future proceeding based on the tort. It would be very remarkable if it were so. "The fallacy of the argument," as Lord Ellenborough said in Hunter v. Prinsep, "appears to us to consist in attributing more effect to the mere form of this action than really belongs to it. In bringing an action for money had and received, instead of trover, the plaintiff does no more than waive any complaint, with a view to damages, of the tortious act by which the goods were converted into money, and takes to the neat proceeds of the sale as the value of the goods." When the plaintiff "waived the tort" and brought assumpsit, he did not thereby elect to be treated from that time forward on the basis that no tort had been committed; indeed, if it were to be understood that no tort had been committed, how could an action in assumpsit lie? It lies only because the acquisition of the defendant is wrongful and there is thus an obligation to make restitution.

A person upon...