Ladbroke & Co v. Todd

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.