Banker's statutory protection against conversion liability depends on good faith and reasonable care before paying out cheque proceeds.

A banker is protected from conversion liability for a cheque with defective title where it acts in good faith and without negligence in the ordinary course of business. The decisive inquiry is whether reasonable care was taken before the proceeds were paid out to the customer, assessed by reference to the circumstances known at the time. The bank was entitled to rely on an apparently trustworthy referee, and it was not negligent merely because further inquiries might later have seemed possible. Clearance of the cheque before the reference was received did not defeat the statutory protection on these facts, because the evidence showed compliance with the banker's statutory standard.

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Issues: Whether the defendant bank was protected from liability for conversion under section 4 of the Cheques Act 1957 on the facts of the collection and payment of the cheque, and whether it had acted in good faith and without negligence in opening the account, clearing the cheque, and allowing the customer to draw on the proceeds.

Analysis: The statutory protection for bankers was treated as a qualified immunity from the strict liability that would otherwise arise at common law for conversion of a cheque as goods. The relevant inquiry was whether the bank had taken reasonable care, judged by the circumstances known to it at the time it allowed the customer to use the proceeds, and whether it had acted in good faith. The court held that the bank was entitled to rely on an apparently trustworthy referee, was not bound to subject the customer to detective-like interrogation, and was not negligent merely because it did not make further inquiries that might in hindsight have been possible. The fact that clearance of the cheque occurred before the reference was received did not, on the facts, make the bank liable, since the decisive question was whether reasonable care had been taken before the proceeds were paid out to the customer. The evidence of normal banking practice supported the conclusion that the bank's conduct met the statutory standard.

Conclusion: The bank was held to have acted in good faith and without negligence, and therefore retained the statutory protection against liability.

Final Conclusion: The appeal failed because the bank's conduct satisfied the statutory standard for banker protection, so liability for conversion did not arise.

Ratio Decidendi: A banker is protected from liability for receiving payment of a cheque with a defective title if, judged at the time when the proceeds are paid out, it has acted in good faith and with reasonable care in the ordinary course of business, and it is not negligent merely because some further precaution might, in hindsight, have been taken.

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