Account payeeCollecting bankerKing's Bench Division (England)

Motor Traders Guarantee Corporation v Midland Bank Ltd

[1937] 4 Allahabad English Reports 9019371 min read
The case in brief30-second read
Facts
Cheques were issued marked "Account Payee" in favour of Motor Traders Guarantee Corporation. A fraudster deposited these cheques into his personal account at Midland Bank.
Issue
Whether a collecting banker is protected under S.131 when collecting an "Account Payee" crossed cheque for someone other than the named payee.
Held
Collecting a cheque marked "Account Payee" for any person other than the named payee is per se negligent. The words "Account Payee" are a clear instruction to the collecting banker to credit only the payee's account. Disregarding this instruction without inquiry is automatic negligence. S.131 protection is lost.
Principle
Collecting an Account Payee cheque for someone other than the named payee is per se negligent; S.131 protection lost
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Facts

  • Cheques were issued marked "Account Payee" in favour of Motor Traders Guarantee Corporation
  • A fraudster deposited these cheques into his personal account at Midland Bank
  • Midland Bank collected the proceeds without questioning the discrepancy
  • Motor Traders sued Midland Bank for conversion

Issue

  1. Whether a collecting banker is protected under S.131 when collecting an "Account Payee" crossed cheque for someone other than the named payee.

Held

  • Collecting a cheque marked "Account Payee" for any person other than the named payee is per se negligent. The words "Account Payee" are a clear instruction to the collecting banker to credit only the payee's account. Disregarding this instruction without inquiry is automatic negligence. S.131 protection is lost.

Ratio decidendi

"Account Payee" is a direction to the collecting banker. Collection for any account other than the named payee's constitutes per se negligence. No further inquiry into circumstances is needed to establish negligence; the act itself suffices.

Exam use

How to use it in an answer

Key authority for Account Payee questions. Key line: "Account Payee for non-payee = per se negligent; S.131 protection automatically destroyed."

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Citation

Motor Traders Guarantee Corporation v. Midland Bank Ltd [1937] 4 Allahabad English Reports 90

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