A L Underwood Ltd v. Bank of Liverpool and Martins
Rule established
Collecting banker liable for conversion if collects for non-owner without exercising due care; S.131 protection requires absence of negligence
Facts
- Underwood was the sole director of a company
- He paid company cheques (crossed) into his personal account at Bank of Liverpool
- The company (through its liquidator) sued the bank for conversion
- The bank claimed statutory protection
Issue
- Whether a collecting banker is liable in conversion for collecting a crossed cheque for a person who is not the true owner.
Held
- The bank was liable for conversion. Collecting company cheques into a director's personal account without inquiry constituted negligence. S.131 protection was unavailable because the bank failed the "without negligence" condition. The bank should have inquired why company cheques were being credited personally.
Ratio Decidendi
A collecting banker who collects for someone other than the true owner is liable for conversion. S.131 protection is available only when the banker acts in good faith AND without negligence. Failure to inquire into suspicious circumstances destroys protection.
How to use it in an exam
Use for conversion liability and negligence under S.131. Key line: "Collecting for non-owner without due care = conversion; S.131 lost."
Source
Source: King's Bench Reports
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.
Cited in study notes
Crossed Cheques and Account PayeeConversion liability of collecting banker