Banker - Customer Relationship
(cheque, deposit, payment)

Banker

Now

Traditionally

Receive deposits, Honouring cheques. Giving loans

Issue credit cards, FOREX, MM, Electronic transfers, trade finance facilities, insurance, UT and investments

Banking
business

pay or collect cheques drawn
or paid in by customers

provision of finance

accept deposit on CA, SA

Judicial Interpretations

accept money & collect cheques - credit customer acc

honours cheques or payment order - debit customer acc

keep CA - credits and debits are entered

Cases

Sabah Development Bank v. SKBS (Sabah) S/B & Ors.
Development Financial Institutions are not bank.
x banker if x CA, pay cheques drawn in or collect cheques for customers

Customer

Depositor: person entitles to repayment fo deposit, whether deposit made by him or other person

Customer > depositor

Principles of
B-C R/S

Intention to enter r/s

Account in B for transaction purpose

Duration not important
-single transaction; fraudster

Contract exists when Bank accepts and act on customer's instructions before account is opened

Nature and Types of R/S

Ordinary
contractual r/s

Special
relationship

B-C R/S contractual in nature

Terms of contract - expressed,
implied, imposed by statute

Joachimson v Swiss Bank Corporation

  • B no obligation to repay customer money unless demanded
  • B obligation to pay cheque is conditional upon cheque in proper form
  • customer must have sufficient fund in account for bank to make pmt

Two types:

  1. Debtor - Creditor R/S
  2. Agent & Prinncipal R/S

Agent-Principal

Mandate for certain act in acc

B - agent authority - perform with skill

  • paying right person with right amount, in a timely fashion observe any other special instruction

E.g.

  1. Standing order, remittances
  2. Bills collectiosn or trade transactions
  3. Proceeds of cheques
  4. Drawing & pmt of cheques

Fiduciary r/s

Fiduciary - person who propert or power is entrusted for the benefit of anoher based on trust and confidence

Bank has fiduciary duties...:

  1. as trustee - trust fund
  2. not take undue advantage
  3. advice to invest in company Bank loaned money

Duty to avoid conflict of interest

with agency r/s, duty to avoid making secret profit

Constructive trustee
and beneficiary r/s

3rd party has right over funds held by customer

Bank knows customer hold money in trust , Bank should not part the money for any purpose inconsistent with trust, even if customer give instructions
Otherwise, B - a party of breach of trust
Because B is a constructive trustee - thus, held liable