Imperial Bank Of India V. Abeyesinghe

1927 Present: Fisher C.J., Schneider and Garvin JJ.

THE IMPERIAL BANK OF INDIA v. ABEYESINGHE.

329-D. C. Colombo, 17,824.

Condictio indebiti-Payment of a forged cheque-Claim by bank- Money paid under mistake of fact-Estoppels.

The defendant, a Proctor, received a cheque in part payment of the consideration on the transfer of a land, which he attested as Notary Public. The cheque was drawn in defendant's favour by the alleged purchaser and was presented by the defendant personally at the Hank. On receiving payment the defendant handed the money to the vendor. It transpired that the signature on the cheque wag a forgery and that the land transaction was entirely fictitious.

In an action brought by the Bank against the defendant for the recovery of the proceeds of the cheque,-

Held per FISHER C.J. and SCHNEIDER J. (GARVIN J. dissentient), that the Bank was entitled to recover the money as paid under a mistake of fact.

Per GARVIN J.-The payment of the cheque on presentation is a representation by the Bank that it believed it to be a genuine cheque of its customer, and the defendant having been induced by this representation to pay the proceeds in accordance with his instructions, the money is not recoverable from him.

THIS was an action for the recovery of a sum of Rs. 2,000 and interest, being the proceeds of a cheque paid by the plaintiff Bank to the defendant in the mistaken belief that it was a genuine cheque drawn by D. S. P. Abeyewardene, one of its customers. The defendant, who is a Proctor and Notary, received a visit from one John Perera who represented himself as the owner of a land which he wished to sell to D. S. P. Abeyewardene. A few days later defendant received a letter dated November 2, 1924, signed by D. S. P. Abeyewardene. The writer instructed the defendant to prepare a conveyance of the land belonging to John Perera in favour of his uncle and informed him that he would send a cheque in part payment of the consideration due to John Perera. The defendant then received a letter dated November 3, 1924, enclosing a cheque for Rs. 2,000 in his favour drawn on the plaintiff Bank and signed D. S. P. Abeyewardene. On the day he received the cheque the defendant went to the Bank and presented it. On receiving payment he paid the money to John Perera and obtained

a receipt. It was arranged that John Perera should come with the purchaser to complete the transaction a few days later. As they did not appear, the defendant set inquiries on foot and as a result it was ascertained that the cheque was a forgery and that the land transaction was fictitious.

The learned District Judge gave judgment in favour of the Bank, holding, inter alia, that there was no negligence on the part of the Bank and that the Bank was not estopped from claiming payment on account of any loss suffered by the defendant.

Hayley, K.C. (with Rajapakse), for defendant, appellant.- A holder of a bill of exchange is entitled to know on presentation or at the latest before the day of presentation is out, whether the bill of exchange will be honored or dishonored. (Vide Cocks v. Masterman1; The London and Ever Plate Bank Ltd. v. The Bank of Liverpool 2 ; Smith v. Mercer.3

The duty is cast on a bank of ascertaining whether a signature on a cheque is a genuine one or not. This principle is borne out by the fact that on endorsement this duty is at an end. Then the bank is not liable even if the endorsement is a forgery. The reason for this is that although the bank has a register of the signature of its clients, it has no such register of endorsements. (Vide the Imperial Bank of Canada v. Bank of Hamilton.4)

The bank is estopped by conduct. In paying the money due on the cheque in question the bank made a representation to the payee that the signature was in order. It will be noted that if a bank pays money on a cheque when there are no funds in the bank to

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