Demand draft remittance can create a fiduciary relationship, giving the purchaser priority over ordinary creditors in liquidation.

Where money is paid to a bank for remittance to another place under a special arrangement, the ordinary debtor-creditor relation arising from a demand draft may be displaced. The court held that the purchaser may prove an express or implied contract, supported by banking practice and the bank's own accounting, showing that the draft was only a token for transmission and that the bank held the funds in an agency or fiduciary capacity. On that footing, the purchasers were not mere unsecured creditors in liquidation and were entitled to priority payment.

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Issues: Whether purchasers of demand drafts, in the circumstances proved, were mere unsecured creditors of the bank in liquidation or were entitled to priority on the basis that the bank held the remitted money in an agency or fiduciary capacity for transmission to the place of payment.

Analysis: A demand draft is ordinarily a negotiable instrument and, taken by itself, the relationship between the purchaser and the issuing bank is that of debtor and creditor. However, that ordinary position may be displaced where the purchaser proves a special contract, express or implied, that the money was paid for transmission to another place and for payment to the named payee or his order. Such a special contract is not excluded by the form of the draft, and evidence of banking practice and the bank's own method of accounting may be used to show that the draft was only a token for remittance. On the evidence, the transaction was understood by both sides as a remittance service, the bank charged commission for carrying the money, and an equivalent amount was earmarked for payment at the destination. The draft therefore did not embody the whole contract, and the relationship created was fiduciary rather than a mere debt.

Conclusion: The applicants were not confined to the position of ordinary creditors and were entitled to priority payment.

Final Conclusion: Demand drafts issued for the specific purpose of transmitting money to another place can, on proof of the underlying arrangement and banking practice, create an agency or trust relationship that defeats the ordinary debtor-creditor characterization.

Ratio Decidendi: Where money is paid to a bank for the specific purpose of remittance to another place and that purpose is established as part of the contract, the bank holds the amount in a fiduciary capacity until payment at the destination, and the purchaser of the draft is entitled to priority over ordinary creditors in liquidation.

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