Shah and Another v Exchange Bank of India and Africa Ltd (Civil Appeal No. 68 of 1950) [1951] EACA 25 (1 January 1951)

COURT OF APPEAL FOR EASTERN AFRICA

Before Sir Barclay Nihill, President, Lockhart-Smith, Vice-President, and THACKER, Ag. C. J. (Kenya)

RAICHAND HIRJI SHAH and KANJI HIRJI SHAH (carrying on business as "SHAH RAICHAND HIRJI and Co."), Appellants (Original Plaintiffs)

v

THE EXCHANGE BANK OF INDIA AND AFRICA, LTD. (in liquidation), Respondent (Original Defendant)

Civil Appeal No. 68 of 1950

(Appeal from the decision of H. M. Supreme Court of Kenva—De Lestang, J.)

Bank—Liquidation—Date when sum paid becomes property of Bank.

On 2nd May, 1949, the appellants had a sum of Sh. 16,000 in the Standard Bank of South Africa at Mombasa, where they had no account. They instructed this Bank to pay this sum to the Mombasa branch of the Exchange Bank of India which had an account with the Mombasa branch of the Standard Bank of South Africa.

On 2nd May the Standard Bank of South Africa credited the Exchange Bank of India with the sum of Sh. 16,000 and the same day sent them a written advice note that they had done so. This advice note did not arrive till the 4th May and the appellants' account was not credited with the money until 5th May. On 3rd May the Exchange Bank of India went into liquidation.

The appellants claimed in the Supreme Court that they were entitled to the return of their money in full because it can be said not to have reached the Exchange Bank of India until 4th May, the day the Bank received the advice note and the day after it ceased to function as a Bank.

It was held that the Sh. 16,000 became the property of the Exchange Bank of India when it was credited to their account on 2nd May. The appellants could only therefore lodge a proof of debt with the liquidator.

Held (21-3-51).—It was rightly held that the money became the property of the Exchange Bank of India on 2nd May. For on that day the Exchange Bank of India could have drawn cheques against it.

Case refererd to: Re Farrows Bank Ltd., 1923 1 Ch.

41.

Appeal dismissed.

Lean and Shackleton for the appellants.

A. B. Patel for the respondents.

JUDGMENT (delivered by SIR BARCLAY NIHILL, President).—This is an appeal from the Supreme Court of Kenya on a matter which arose out of the liquidation ^cof the Exchange Bank of India and Africa, Ltd., who is the respondent to this .appeal.

The material facts can be briefly stated.

On 2nd May, 1949, the appellants had a sum of Sh. 16,000 in the Standard Bank of South Africa at Mombasa, where they had no account. They, therefore, instructed this Bank to pay this sum to the Exchange Bank of India, Mombasa Branch, for their credit. This Bank had an account with the Mombasa Branch. rof the Standard Bank of South Africa, so the latter credited the Exchange

Bank with the sum of Sh. 16,000 on 2nd May and dispatched a written advice note to the effect that the money had been so credited on behalf of the appellants. This advice note did not reach the Exchange Bank until 4th May and the appellants' account was not credited with the money until 5th May. On 3rd May the Exchange Bank closed its doors and went into liquidation. The simple issue which the learned Judge in the Court below had to determine was whether this Sh. 16,000 became the property of the Exchange Bank when it was credited to its account at the Exchange Bank on 2nd May so that it now $liquidation$ whether said forms part of the assets $\alpha$ r $\quad\text{it}\quad$ can he to have not reached the Exchange Bank until 4th May, the day the Bank received the advice note from the Standard Bank and the day after it ceased to function as a Bank. If this question can be answered in the latter sense then the appellants are entitled to a return of their money in full and need not lodge a proof of debt with the liquidator. The learned Judge answered this question in favour of the liquidator and despite the attractive argument put forward by Mr. Lean I feel sure he was right.

Mr. Lean has submitted that the Standard Bank was acting simply as the appellants' agent and that the agency was not concluded until the appellants were in a position to draw against their account with the Exchange Bank of India which was not until 5th May. What, however, I think the appellants cannot get over is the fact that after the sum had been credited to the Exchange Bank on 2nd May, the Exchange Bank could have drawn cheques against it, for a cheque up to the amount of the credit standing in the Standard Bank's books on 2nd May drawn and presented by the Exchange Bank would have had to have: been met by the Standard Bank. It seems to me therefore impossible to say that after the Sh. 16,000 had been credited to the Exchange Bank's account on 2nd May that it did not then become an asset of the Exchange Bank and so a. pre-liquidation asset.

Counsel for both parties have cited the case of in re Farrows Bank, Ltd., 1923.

1. Ch. 41 but as I read the judgment of Lord Sterndale M. R. it assists the respondent rather than the appellant. This was a cheque case and the question was, as it is here, whether Farrows Bank received the money before they suspended payment. The Court of Appeal upheld a judgment against the Liquidator because although a credit on account of a cheque had been made in the books of Barclays Bank in favour of Farrows Bank, the cheque had not been cleared before Farrows Bank suspended payment. The issue really turned on whether it. was an absolute or a conditional credit and the Court on the material before it. thought it was the latter. It might have been otherwise according to Lord Sterndale at page $54:$ —

"If the meaning of that credit is that on the credit being given Farrows." Bank were entitled to draw against that amount so credited by Barclays. Bank or to deal with it for any purpose at that time."

In the case now before us it is conceded that the Standard Bank had the money on 2nd May so that no question of having to await clearance of a cheque arises. They had the money and they did with it what they had been instructed to do with it, namely paid it over to the Exchange Bank, and the Exchange Bank. could have made use of that money any reasonable time after it had been. credited to them on 2nd May.

I think that the appeal fails and must be dismissed with costs.

LOCKHART-SMITH, Vice-President.—I concur.

THACKER, Ag. C. J. (Kenya).—I concur.