A bank may have a fiduciary duty to hold money for a specific purpose based on the customer's instructions, and such instructions can have the legal effect of making the bank a bailee or trustee with respect to the amount.

Munro, J.

1. This is an appeal by the Official Assignee against an order of the learned Chief Justice sitting as Commissioner in Insolvency.

2. The facts are not in dispute. The respondent had, on the 5th August 1906, Rs. 600 standing to the credit of his current account with Arbuthnot & Co. On the above date he wrote to Arbuthuot and Co. and requested them to buy on his behalf a Government Promissory Note for Rs. 1,000, when the amount of his current account reached that sum. On the 30th September 1906 he again wrote and requested Arbuthnot & Co. to buy the promissory note as there was then Rs. 1,000 to his credit. He received no reply up to the 10th October. He then called at the Bank and was told by two officers of the Bank that his instructions would be carried out in due course. The promissory note had not, however, been purchased when Arbuthnot & Co. suspended payment on the 22nd October 1906, though it could have been bought for Rs. 5,000 between the 30th September and the 22nd October. On these facts the learned Commissioner held that Avbuthnot and Co, held the sum of Rs. 1,000 in a fiduciary capacity, and directed the Official Assignee to pay the whole amount to the respondent.

3. As pointed out in my judgment in O.S. Appeal No. 27 of 1908, it was competent for the respondent to give such directions with regard to the money standing to the credit of his current account as would thereafter cause Messrs. Arbuthnot & Co. to hold the money in fiduciary capacity. The effect of his order to them to buy was the same as if he had attended in person at the Bank, drawn his money, as he was entitled to do at any time and then placed it in the hands of Messrs. Arbuthnot & Co. for the specific purpose of buying the promissory note. In the face of the respondents specific directions, Messrs. Arbuthnot and Co. were not entitled to use the money as their own but clearly held it in a fiduciary capacity. For the appellant, In re Barnets Banking Company, Ltd. Masseys case (1870) 39 L.J. Eq. 635, is relied upon. There one Massey paid into a Bank a certain sum with instructions to remit it to another firm. Next day the Bank stopped payment without having made the remittance. It was held that Massey had only the right to prove with the general creditors, as the Bank stopped payment before taking any step to apply the money as directed. I am, with great respect, unable to see how this circumstance could affect the character of the money in the hands of the Bank. It was money which the Bank was clearly not entitled to use as its own. Heber Hart in his "Law of Banking 2nd edition, page 146, makes the comment in a footnote that the decision seems of doubtful anthority, and we have not been referred to any case in which it has been followed. In King v. Hutton (1900) 2. Q. B. 504, it was pointed out that where a stock-broker receives from his client a sum of money for the purchase of stock, he has only a special property in the money so handed to him for a specific purpose and if he became bankrupt while the stock was unpurchased the money would not go into the general account in the bankruptcy. The same principle would, I think, apply when money is handed to a Banker for the specific purpose of purchasing securities and, as has been shown, that is, in effect, the position in the present case. In Prince v. Oriental Bank Corporation (1878) 3 A.C. 325 it was observed that the decision in D.E. Bernales v. Fuller (1811) 14 East. 590 might be supported on the ground that money had been paid in specifically for the payment of the particular bill and had been accepted by the Bankers for that purpose and that they made themselves, by so accepting the money, agents to hold it for the plaintiffs. Again in Vaughan v. Halliday (1874) L.R. 9 Ch. A.C. 561 mention is made of the rule of law that if a remittance is sent for a specific purpose the person who receives the money must either apply it for the purpose for which it is sent or else return it. I th