Surrey Asset Finance Ltd v National Westminster Bank

A drawer who has delivered an account-payee cheque to its payee may face substantial difficulty claiming conversion against a collecting bank, because conversion requires title, possession or a right to possession. Under section 21(3) of the Bills of Exchange Act 1882, valid and unconditional delivery is presumed where a bill is no longer in the drawer’s possession, unless the contrary is proved. The mere account-payee direction does not, on the available material, reverse that presumption. On a second-tier appeal, permission requires an important point of principle or practice, or another compelling reason. The claim must also have a real prospect of success to justify summary judgment.

The claimant financed the purchase of a Mercedes and issued an account-payee cheque for £26,000 to the supplier. The supplier’s sole director paid the cheque into his personal trading account, although the defendant bank acted as collecting bank. After the hire-purchase payments stopped, the claimant recovered and sold the car, then sought recovery from the bank in conversion.

Master Rose granted the claimant summary judgment. On appeal, Mr Anthony Temple QC, sitting as a Deputy High Court Judge, set that order aside and dismissed the claimant’s application. The claimant sought permission for a second-tier appeal. The central issues were whether the drawer retained the title required to sue in conversion and whether the case met the threshold for a further appeal.

1. Applicable threshold. This was a second-tier application. Permission required an important point of principle or practice, or another compelling reason. The fact that the claimant had not lost at both earlier levels was relevant, but did not establish that threshold. Even applying the less demanding first-tier test, the claimant could not show a real prospect of success.
2. Title to the cheque. A claim in conversion requires the claimant to have title, ownership, possession or a right to possession. Once the drawer had delivered the cheque to the payee, there were very substantial difficulties in showing that the drawer retained the necessary title. Section 21(3) of the Bills of Exchange Act 1882 presumed valid and unconditional delivery where the bill was no longer in the possession of the drawer, unless the contrary was proved. The account-payee direction alone did not reverse that presumption. The available summary-judgment material did not demonstrate circumstances capable of doing so.
3. Disposition. The court could not fault the Deputy High Court Judge’s refusal to grant summary judgment. The decision did not necessarily preclude a differently formulated claim proceeding to trial. However, no important point of principle or practice, compelling reason, or real prospect of success justified a further appeal. The application for permission to appeal was dismissed.

• Court of Appeal (Civil Division): On 24 January 2001, the second-tier application for permission to appeal was dismissed.
• Queen’s Bench Division: Master Rose granted summary judgment for the claimant on 22 May 2000. On 8 September 2000, Mr Anthony Temple QC, sitting as a Deputy High Court Judge, allowed the defendant’s appeal, set aside that order and dismissed the claimant’s summary-judgment application.