The question for decision is whether the Savings Bank of South Australia, the appellant, is liable for the conversion of a cheque drawn by the respondent and crossed not negotiable. On 17th May 1933 a Mrs. E. M. Jenkins of Prospect applied to the bank's branch in that suburb to open an account. She produced the cheque in dispute and said that she wished to pay it in. The cheque, which was for the sum of £350, was drawn upon a trading bank and made payable as follows: "pay 253 E. M. Jenkins or order." The bank clerk asked whether she had ever had an account with the bank before. She said "No." The branch manager then examined the cheque and asked whether she was the E. M. Jenkins referred to in the cheque. She said "Yes." He told her that before an account could be opened she must be identified by someone who knew her and whom the bank knew. She named an officer of the local district council, and the manager gave her a printed form for him to sign certifying to her signature and to his personal knowledge of her. The officer she named was an inspector whom the manager knew well. He was a customer of the branch where his signature was known. In a short time she returned with a certificate duly signed by him. Her signature to which he had certified consisted of her full name, Elsie May Jenkins. An account was opened for her in that name and she endorsed the cheque "E. M. Jenkins" in writing which corresponded with the signature "Elsie May Jenkins." The deposit of £350 was entered in the pass book, and the cheque was presented at the bank upon which it was drawn and duly paid. Mrs. Jenkins drew out £275 of the money in sums of £75 and £25 on various dates commencing on 20th May and ending on 27th July 1933. In August 1933, the respondent notified the bank that the cheque did not belong to the E. M. Jenkins who had paid it in, and he claimed payment of the amount of the cheque.

The facts upon which this claim rested were peculiar. The respondent, a solicitor carrying on business in Adelaide, had occasion to pay on behalf of some executors the sum of £350 to a beneficiary named Eliza Ann Maria Jenkin whose address was 49 Alpha Road, Prospect. He drew the cheque in question on 15th May and enclosed it in a letter addressed: - "Mrs. E. M. Jenkins, Prospect." The letter explained that the payment was on account of her one-ninth share in the residue of the estate, and requested her to sign and return a receipt enclosed. The letter was delivered on the following day to Mrs. Elsie May Jenkins who lived at 105 Main North Road, Prospect. She signed the receipt and returned it to the respondent. Strangely enough she placed under her signature her correct address and her telephone number. No doubts were aroused at the respondent's office by the receipt, in spite of the address and of the fact that the name was spelt "Jenkins" and not "Jenkin."

As the cheque was marked "not negotiable," the appellant bank could obtain no better title to it than its customer possessed. Its only defence to the claim for conversion depends upon sec. 88 of the Bills of Exchange Act 1909-1932, which protects it on proof that it acted "in good faith and without negligence" in receiving "payment for a customer." It is conceded on the authority of Ladbroke & Co. v. Todd[1] and Commissioners of Taxation v. English, Scottish and Australian Bank[2] that Mrs. E. M. Jenkins was a customer of the bank when it received payment. But the respondent denies that the bank acted without negligence.

The action was heard in a Local Court where the magistrate held that the bank was guilty of negligence, because, in dealing with a crossed not negotiable cheque tendered in order to open an account, it ought to have obtained not only evidence that the new customer's name was the same as that of the payee, but also that the cheque was in fact her property. Upon appeal to the Supreme Court this decision was affirmed by Angas Parsons, Napier and Piper JJ. Napier J., who delivered the judgment of the Court, said: - "We think that the effect of the evidence is to show that a prudent banker, when he is asked by a stranger to open an account with a crossed cheque, ought not to act upon the statements made to him, without obtaining corroboration from some reliable source of so much as is necessary to justify a conclusion as to the ownership of the cheque. The extent to which the inquiry should be pressed is a question of fact, and it must necessarily depend upon the circumstances of the particular case, whether the correspondence of the name of the customer to that of the payee, is sufficient to exonerate the banker from the charge of negligence."

We are unable to agree in the conclusion of the Supreme Court. There is, of course, no doubt that special vigilance is demanded when a new account is opened and a crossed cheque is tendered, particularly when it is marked "not negotiable." For it is evident that the purpose of opening a new account may be to obtain payment of a cheque dishonestly come by, and experience has shown that frauds are not uncommonly perpetrated in this manner. But in the present case, the customer was a woman whose identity was established by a reliable reference. She was not engaged in business. She produced a cheque of a date it would bear if it had reached her in due course of post, as was in fact the case. Her name corresponded exactly with that to which the cheque was made payable. It was only by a strange coincidence and a curious combination of mistakes that she was able to present the convincing appearance of ownership. We think it would be setting an extraordinarily high standard of diligence to hold that in these circumstances a prudent banker ought to have made still further inquiry. Indeed, it is difficult to see what course of inquiry could have been pursued fruitfully. If Mrs. E. M. Jenkins had been further questioned as to the manner in which she acquired the cheque, it would have been enough for her to produce the respondent's letter. If the branch manager had communicated with the respondent by telephone or letter, it is most unlikely that he would have chanced on any statement or question which would have disclosed to the respondent the fact that the proposing customer was not the beneficiary for whom the cheque was intended. The stringent rules which banks adopt for the guidance of their officers afford evidence of the kind of precaution which may be taken (cf. per Lawrence L.J., E. B. Savory & Co. v. Lloyds Bank Ltd.[3]); but it is unsafe and perhaps unfair to rely upon their rigour as a measure of the standard of prudence required by law. In the circumstances of the present case, however, it is quite improbable that any other precaution would have availed. Indeed, once the identity of the payee of the cheque with the customer is satisfactorily established, need for further caution disappears. We think that any prudent man acting in the grave concerns of his own or of others would upon the information before the branch manager be fully satisfied of that identity. In the Courts of justice such evidence would be acted upon without hesitation. It is true that Mrs. E. A. M. Jenkin possessed an account at the same branch of the Savings Bank, and that some time before she had paid into that account a substantial cheque drawn in her favour by the respondent. But the branch manager did not recollect the circumstance. In the multitude of accounts it cannot be negligence on the part of the servants of the bank not to call to mind the existence of a customer of similar name, or the identity of the drawer of a cheque the customer has paid in. This case differs from all others which have been decided under the provisions of sec. 88 in that the person who produced the cheque truly corresponded in name with the payee. We think that the bank established that it acted without negligence and in good faith.

The appeal must therefore be allowed. The order will be: - Appeal allowed. Discharge the order of the Supreme Court. In lieu thereof order that the judgment of the Local Court of Adelaide be set aside and that judgment be entered in the Local Court for the defendant with costs. Order that the plaintiff respondent pay the defendant appellant's costs of the appeal to the Supreme Court and of the appeal to this Court.

The respondent Wallman, who carries on his profession as a solicitor under the name of Ingleby & Wallman, brought an action in the Local Court at Adelaide against the appellant, the Savings Bank of South Australia, for the conversion of a cheque or to recover the proceeds of the cheque, collected by the appellant as money had and received to the use of the respondent. The cheque, which was for £350, was drawn on 15th May 1933 by Ingleby & Wallman (Trust Account) upon the Commercial Banking Co. of Sydney Ltd., in the following form: - "Pay 253 E. M. Jenkins or order three hundred and fifty pounds." It was crossed generally, and the words "not negotiable" were added. The defence was that the appellant was a banker which in good faith and without negligence had received payment of the cheque for a customer, and by force of sec. 88 of the Bills of Exchange Act 1909-1932 incurred no liability to the respondent by reason only of having received payment. It was conceded during the argument that the appellant was a banker and that it had acted in good faith and had received payment of the cheque for a customer (Commissioners of The State Savings Bank of Victoria v. Permewan Wright & Co.[4]; Ladbroke & Co. v. Todd[5]; Commissioners of Taxation v. English, Scottish and Australian Bank[6]). It was also conceded that the "not negotiable" crossing had no bearing upon the matter involved in this case (Commissioners of The State Savings Bank of Victoria v. Permewan Wright & Co.[7]; Crumplin v. London Joint Stock Bank Ltd.[8]). The sole question submitted for our consideration is whether the Savings Bank had received payment of the cheque without negligence.

The words "without negligence" in sec. 88 of the Bills of Exchange Act mean "without want of reasonable care in reference to the interests of the true owner." The question is really one of fact in all the circumstances of the particular case (Commissioners of Taxation v. English, Scottish and Australian Bank[9]; Commercial Bank of Australia Ltd. v. Flannagan[10]). In the present case it appears that Eliza Ann Maria Jenkin resided in Alpha Road, Prospect, South Australia, and she seems to have been referred to both as Mrs. Jenkin and as Mrs. Jenkins. She was entitled to a one-ninth share in the residue of the estate of E. M. Day deceased. The respondent acted as the solicitor for the executors of that estate. He drew the cheque for £350 for the purpose of paying to Mrs. E. A. M. Jenkin part of her share in the residuary estate already mentioned. But it was made payable, as already stated, to E. M. Jenkins. It was posted on 15th May 1933 to Mrs. E. M. Jenkins, Prospect. It so happened that Mrs. Elsie May Jenkins, who was not Mrs. E. A. M. Jenkin, also resided at Prospect, and the letter with the cheque enclosed was delivered to her in the ordinary course of post. She forwarded a receipt for the cheque, which I suppose had been prepared in the respondent's office, "on account of my one-ninth share in residue of the estate of Eleanor Mary Day." It was dated 16th May 1933 and signed as follows: -

E. M. Jenkins Mrs. E. M. Jenkins 16.5.33 105 Main Nt Rd. Phone 2109. Prospect.

The receipt did not excite any suspicion in the respondent's office, and was filed in due course. Elsie May Jenkins took the cheque to the Savings Bank, where she had no account, and applied to open an account with it. She was accompanied by another woman, but nothing in their demeanour or appearance gave rise to any suspicion. Mrs. Jenkins, however, was unknown to the bank officers, and, in prudence and following their office instructions, they inquired if she were the E. M. Jenkins referred to in the cheque and the rightful owner. She said "Yes." The manager of the branch said: "Before an account can be opened with the bank it will be necessary for you to be identified by someone who is personally known to you and also to the bank." She said: "I know Mr. Roy Bennett, an officer of the district council." The manager replied: "All right." Bennett was an old customer of the bank, and had been known to the manager of the Prospect Branch for some twenty years. The manager gave Mrs. E. M. Jenkins a form for the purpose of obtaining Bennett's certification. She went away, and returned in ten minutes or so with the cheque, and the certificate signed by Bennett. A specimen of the signature of Mrs. E. M. Jenkins was upon the document, and Bennett certified "that the above signature was signed in my presence by Elsie May Jenkins, who is personally known to me." The manager then required Mrs. Jenkins to indorse the cheque, which she did in his presence, "E. M. Jenkins." The manager compared the indorsement with the specimen signature, and was satisfied that they were written by the same person. A deposit account was then opened, but the deposit book handed to Elsie May Jenkins stated that the cheque was not available until collected. It was presented by the bank for collection, paid on 18th May 1933, and between 20th May and 27th July 1933 the depositor withdrew and was paid sums amounting in all to £275, but no further payments have been made.

The burden is, no doubt, upon the appellant to establish that it received payment of the cheque for a customer without negligence, having regard to the interests of the true owner. It is a statutory duty, and the price paid by bankers for protection under sec. 88. Despite the opinion to the contrary in the Courts below, the bank has, in my opinion, established that it received payment of the cheque for a customer without negligence. It was not dealing with a stale cheque, or with a cheque which on its face excited any suspicion. The cheque was in the possession of a person whose name was E. M. Jenkins. The fact that her name was really E. M. Jenkins was certified by an old and reputable customer of the bank. It was a reasonable conclusion from these facts that the person in possession of the cheque was the payee. But it is said that a prudent banker ought to have made further inquiries into the transaction, and, in particular, from the drawer of the cheque. It is unlikely, in the curious circumstances of this case, that anything would have resulted from such inquiries. But that fact cannot, in my opinion, excuse the bank if a reasonable and prudent banker ought to have made such inquiries (E. B. Savory & Co. v. Lloyds Bank Ltd.[11]). This is the crux of the case. If a banker exercises "the same care and forethought in the interest of the true owner with regard to cheques paid in by the customer as a reasonable business man would bring to bear on similar affairs of his own," then the banker has discharged his duty, and is protected by sec. 88 of the Bills of Exchange Act. It may be that some bankers, in an excess of caution, would have made further inquiries in the present case, but in my opinion any prudent banker or business man would have acted on the information before the bank, and might reasonably have concluded, without any further inquiry, that Mrs. E. M. Jenkins was the payee named in the cheque. The bank, in my opinion, discharged the duty cast upon it by the section; and it appears to me that it was want of care on the part of the respondent and not any negligence on the part of the bank that made possible the fraud committed by Mrs. Jenkins.

Appeal allowed. Discharge the order of the Supreme Court. In lieu thereof order that the judgment of the Local Court of Adelaide be set aside and that judgment be entered in the Local Court for the defendant with costs. Order that the plaintiff-respondent pay the defendant-appellant's costs of the appeal to the Supreme Court and of the appeal to this Court.

Solicitors for the appellant, Baker, McEwin, Ligertwood & Millhouse.

Solicitors for the respondent, Alderman, Reid & Brazel.

[1] (1914) 19 Com. Cas., at p. 261; 111 L.T., at pp. 43, 44.

[4] [1914] HCA 83; (1914) 19 C.L.R. 457.

[5] (1914) 19 Com. Cas. 256; 111 L.T. 43.

[8] (1913) 19 Com. Cas. 69, at pp. 76, 77.

[10] [1932] HCA 51; (1932) 47 C.L.R. 461, at p. 467.