Customer definitionAccount openingKing's Bench Division (England)

Ladbroke & Co v Todd

(1914) 30 TLR 43319141 min read
The case in brief30-second read
Facts
A thief found a crossed cheque and opened an account at Ladbroke's bank. The bank opened the account without proper verification or references. The thief deposited the stolen cheque and the bank collected the proceeds.
Issue
Whether a bank that collects a stolen cheque for a person who opened an account without proper references can claim S.131 protection.
Held
The bank was negligent in opening the account without verifying references. This negligence at the account-opening stage destroyed S.131 protection for subsequent collections. A single transaction was sufficient to make the thief a "customer" (confirming the modern definition), but the bank's failure to exercise due diligence at onboarding rendered it liable for conversion.
Principle
A single transaction suffices to make a person a 'customer'; bank negligent in opening account without references loses S.131 protection
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Facts

  • A thief found a crossed cheque and opened an account at Ladbroke's bank
  • The bank opened the account without proper verification or references
  • The thief deposited the stolen cheque and the bank collected the proceeds
  • The true owner sued the bank for conversion

Issue

  1. Whether a bank that collects a stolen cheque for a person who opened an account without proper references can claim S.131 protection.

Held

  • The bank was negligent in opening the account without verifying references. This negligence at the account-opening stage destroyed S.131 protection for subsequent collections. A single transaction was sufficient to make the thief a "customer" (confirming the modern definition), but the bank's failure to exercise due diligence at onboarding rendered it liable for conversion.

Ratio decidendi

Negligence at account opening destroys S.131 protection for all subsequent collections on that account. A bank must verify identity and references before opening accounts. A single transaction suffices to make a person a customer.

Exam use

How to use it in an answer

Use for negligence at account-opening and its cascading effect on S.131. Key line: "Negligent onboarding = negligent collection; S.131 lost for all future transactions."

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Citation

Ladbroke & Co v. Todd (1914) 30 TLR 433

Reported: Times Law Reports. This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.