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:
- Debtor - Creditor R/S
- 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.
- Standing order, remittances
- Bills collectiosn or trade transactions
- Proceeds of cheques
- 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...:
- as trustee - trust fund
- not take undue advantage
- 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