Ellinger's Modern Banking Law

by Ellinger, E. P.; Lomnicka, Eva; Hooley, Richard

• ISBN13: 9780199281190
• ISBN10: 019928119X
• Edition: 4th
• Format: Paperback
• Copyright: 2005-11-10
• Publisher: Oxford University Press

Summary

This fourth edition has been fully updated and revised to take into account the recent developments in electronic banking and payment, consumer credit, securities, and financial regulation. Also included are new chapters on money laundering and bank guarantees, ensuring this text maps closely on to university law courses.

Author Biography

E. P. Ellinger is Professor of Law at the National University of Singapore.
Eva Lomnicka is Professor of Law at King's College, London and a practising barrister.
Richard Hooley is Professor of Law at King's College, London. He is also a Fellow of Fitzwilliam College, Cambridge.

Table of Contents

Preface to the Fourth Edition	xxi
List of Abbreviations	xxv
Table of Cases	xxvii
Table of Statutes	lxiii
Table of Statutory Instruments	lxxix
Table of International Instruments	lxxxiii
PART I BANKS AND BANKING BUSINESS
The Structure of the British Banking World	3	(23)
The problem in context	3	(2)
The clearing banks	5	(11)
The London scene	5	(8)
The clearing banks of Scotland and Northern Ireland	13	(1)
The Cruickshank Report	13	(3)
The merchant banks	16	(2)
Discount houses and the wholesale money markets	18	(1)
Foreign banks	19	(1)
Overview	19	(1)
The Association of Foreign Banks	19	(1)
The American and Japanese banks	20	(1)
The British Bankers' Association	20	(1)
Comparison with building societies	21	(3)
Other financial institutions	24	(1)
Review of the system	25	(1)
The Control of Banking Activities in the United Kingdom	26	(42)
The need for controls	26	(3)
The Bank of England	29	(3)
The Banking Acts 1979 and 1987	32	(3)
The Financial Services and Markets Act 2000	35	(18)
Background	35	(1)
The need for authorization	36	(3)
'Accepting deposits'	39	(1)
Exempt persons	40	(1)
Authorized persons	41	(2)
Authorized persons: powers of the FSA	43	(2)
Financial promotion	45	(4)
Deposit guarantee scheme	49	(1)
The Financial Ombudsman Service	50	(3)
The EU dimension	53	(8)
Introduction	53	(3)
The 'European passport'	56	(1)
The Banking Consolidation Directive	57	(2)
Capital adequacy	59	(1)
The Deposit Guarantee Directive	59	(1)
Other EU initiatives	60	(1)
The Basle Committee on Banking Supervision	61	(1)
The Banking Codes	62	(4)
Background	62	(1)
Legal status	63	(1)
Content	64	(2)
'CAT' and other standards for retail financial products	66	(2)
Legal Definition and Privileges of Banks	68	(26)
Banks at common law	68	(6)
Problem of defining a bank	68	(1)
Banking business at common law	68	(5)
Defences conferred on banks under the Bills of Exchange Act 1882	73	(1)
Defences conferred on banks by statutes utilizing other definitions	74	(3)
The right to receive deposits from protected customers	74	(2)
The right to invest in protected or supervised transactions	76	(1)
The Bankers' Books Evidence Act 1879	76	(1)
The meaning of 'bank' where the term is undefined	77	(1)
The right to use the term 'bank' in a name	78	(1)
The Consumer Credit Act 1974	79	(13)
Background	79	(1)
Agreements covered	80	(1)
Provisions to be complied with: licensing	81	(1)
Cancellation rights and contractual disclosure	82	(4)
Default and termination	86	(1)
Control of advertisements	87	(1)
Canvassing	88	(1)
Quotations	88	(1)
Credit brokerage	89	(1)
Other 'Ancillary Credit Businesses'	89	(1)
Credit reference agencies	90	(1)
Connected transactions	90	(1)
Powers of the court	91	(1)
Summary	92	(1)
Assessment of statutory treatment of 'banking'	92	(2)
Money Laundering and the Financing of Terrorism	94	(23)
Introduction	94	(1)
An international response	95	(3)
The control of money laundering and terrorist financing in the UK	98	(16)
General	98	(1)
The Proceeds of Crime Act 2002	99	(1)
The money laundering offences	100	(3)
The ``failure to report'' offences	103	(4)
Tipping off	107	(1)
The Terrorism Act 2000 and related provisions	108	(3)
The Money Laundering Regulations 2003	111	(2)
The FSA Handbook	113	(1)
Some problems posed to banks by money laundering control	114	(3)
The Bank and its Customers	117	(84)
The legal nature of the problem	117	(1)
Who is a customer?	118	(3)
The nature of the relationship between banker and customer	121	(6)
The bank's duty of care and position as fiduciary	127	(38)
The banker--customer relationship as a fiduciary relationship	130	(5)
Undue influence	135	(17)
Duty of care in contract and tort	152	(11)
Remedies	163	(2)
The confidential nature of the contract	165	(30)
General scope	165	(5)
Duration and scope of the duty of secrecy	170	(3)
Compulsion at law	173	(8)
Duty to the public	181	(2)
The bank's own interest	183	(3)
Information disclosed with customer's authority	186	(2)
Secrecy and the intervention of foreign courts	188	(7)
Termination of the relationship	195	(6)
PART II THE BANK AS A MONETARY AGENCY IN DOMESTIC TRANSACTIONS
The Bank's Role as a Depository	201	(11)
Economic function and legal concept	201	(3)
Practical implications of the economic and legal concept	204	(1)
The bank as a depository of its customer's funds and as paymaster of his accounts	205	(3)
The bank as its customer's agent for collection	208	(2)
Conclusion	210	(2)
The Current Account	212	(78)
Special nature of the current account	212	(3)
The statement of account	215	(14)
The nature of the problem	215	(1)
The bank's right to rectify errors	215	(2)
The customer's right to demand corrections	217	(8)
Bank statements and pass-book entries as accounts stated	225	(1)
Customer's silence with knowledge of wrong entry	226	(3)
Combination of accounts	229	(20)
Problem in practice	229	(1)
Legal meaning of 'combination of accounts'	230	(4)
When may accounts be combined?	234	(8)
Is notice required?	242	(2)
Special problems in insolvency situations	244	(3)
Combination of accounts in customer's interest	247	(2)
Third-party claims	249	(41)
Definition of the problem	249	(1)
Nature and elements of constructive trust actions	250	(3)
Dishonest assistance	253	(1)
There must have been a trust or other fiduciary relationship	254	(1)
There must have been a misfeasance or breach of trust	255	(2)
The person upon whom liability is to be imposed must as a matter of fact have been an accessory or assisted in the misfeasance or breach of trust	257	(1)
The accessory must have been dishonest	258	(7)
Knowing receipt	265	(1)
Beneficial receipt	266	(3)
Level of knowledge required	269	(4)
Tracing money	273	(1)
Tracing at common law	274	(5)
Tracing in equity	279	(3)
A fiduciary relationship	282	(3)
Overdrawn accounts	285	(3)
Banks as agents	288	(2)
Special Types of Account	290	(39)
Type of problem	290	(1)
Joint accounts	291	(7)
Nature of the account	291	(1)
Right to draw	291	(2)
Survivorship	293	(5)
Partnership accounts	298	(3)
Opening and operating a partnership account	298	(1)
Borrowing through a partnership's account	299	(1)
Dissolution of a partnership by death	299	(1)
Problems of insolvency	300	(1)
Executors' accounts	301	(2)
Trust accounts	303	(4)
General principles	303	(1)
Borrowings by trustees	303	(1)
Duty of the bank	304	(3)
Solicitors' accounts	307	(2)
Operation of the account	307	(1)
Garnishee orders and related problems: who owns the balance?	308	(1)
Estate agents' accounts	309	(1)
Investment businesses' accounts	309	(1)
Local authorities	310	(3)
General principles	310	(1)
Operation of accounts and power to borrow	311	(1)
Liability of the bank	311	(2)
Companies' accounts	313	(5)
General principles	313	(1)
Lending to a company	314	(1)
Dealings in negotiable instruments and current account operations	314	(4)
Unincorporated associations' accounts	318	(2)
Married women's accounts	320	(1)
Operation of account	320	(1)
Borrowing by married women	320	(1)
Wife's guarantee of husband's debt	321	(1)
Minors' accounts	321	(5)
General principles relevant in the context of banking	321	(1)
Specific problems faced by the bank: current-account questions and lending	322	(4)
Mentally incapacitated persons' accounts	326	(3)
General principles	326	(1)
Considerations relevant to banking operations	326	(3)
Interest-bearing Accounts	329	(23)
Classification and comparison with current accounts	329	(2)
Legal nature of the arrangement	331	(3)
Creditor--debtor relationship	331	(1)
Payment to the wrong person	332	(1)
Terms of contract	333	(1)
Joint deposits	334	(1)
Dispositions over balance	334	(5)
Problems concerned	334	(1)
Assignment of balance or of part thereof	335	(1)
Set-off by bank	336	(1)
Third party debt proceedings	337	(1)
Limitation of action	337	(2)
Deposit receipts and pass-books	339	(7)
Problems involved	339	(1)
Legal nature of deposit receipt and pass-book	340	(2)
Loss of deposit receipt or pass-book	342	(1)
The deposit receipt and the pass-book as the subject of a donatio mortis causa	342	(1)
Negotiable certificates of deposit (NCDs)	343	(3)
Foreign-currency deposits	346	(4)
Assessment	350	(2)
The Bank as Paymaster: Negotiable Instruments (including cheques)	352	(60)
Negotiable Instruments and the development of non-transferable payment orders	352	(3)
The clearing of cheques and non-transferable payment orders	355	(9)
The cheque as negotiable instrument	364	(11)
Introductory	364	(1)
Definition and attributes of a cheque	364	(4)
The transferability of a cheque	368	(4)
Post-dated cheques	372	(1)
Marking of cheques	373	(2)
Crossed cheques	375	(6)
Background and types of crossings	375	(2)
Execution of crossing and its effect	377	(1)
Crossing accompanied by the words 'not negotiable'	378	(1)
Cheques crossed with the words 'account payee only' added	378	(2)
Crossing of instruments similar to cheques	380	(1)
The holder's duties in respect of cheques	381	(3)
The meaning of duty and to whom it is owed	381	(1)
Presentment for payment of a cheque	382	(1)
Notice of dishonour	383	(1)
Noting and protest	383	(1)
Implications of the Consumer Credit Act 1974	384	(1)
Travellers' cheques	384	(1)
Bills of exchange other than cheques	385	(19)
Nature and use	385	(2)
The parties to a bill	387	(4)
Position of the holder	391	(6)
Negotiation of a bill	397	(3)
Discharge of a bill	400	(3)
Procedure on dishonour	403	(1)
Promissory notes	404	(2)
Special problems of bills drawn under lines of credit and acceptance credits	406	(4)
The problems defined	406	(1)
Are bills drawn under acceptance credits or lines of credit accommodation bills?	406	(2)
Bankruptcy problems	408	(2)
Negotiable instruments and the Consumer Credit Act 1974	410	(2)
The Paying Bank	412	(54)
The bank's duty to pay cheques	412	(26)
Form of cheques and scope of duty to pay	412	(2)
Availability of funds	414	(4)
Third party debt proceedings	418	(7)
Freezing injunctions	425	(4)
Customer's death or insanity	429	(2)
Bankruptcy and winding-up	431	(3)
Countermand of payment	434	(4)
The bank's liability for wrongful payment: nature of the problem	438	(4)
The paying bank's defences for wrongful payment at common law and in equity	442	(11)
Outline	442	(1)
Customer's carelessness and cases giving rise to estoppel	443	(6)
Ratification	449	(2)
Customer's ambiguous instructions	451	(1)
The equitable doctrine	451	(2)
The paying bank's defences for wrongful payment: statutory protections	453	(8)
Outlay	453	(1)
Payment in due course	453	(1)
Payment in the ordinary course of business	454	(2)
Complementary defence of payment without negligence	456	(2)
Irregularity in or absence of indorsement	458	(3)
The customer's remedies for wrongful dishonour of his cheques	461	(5)
Scope of problem	461	(3)
Action in breach of contract	464	(1)
Action in defamation	464	(2)
Recovery of Money Paid by Mistake	466	(46)
The problem in practice and the basic principle	466	(5)
Recovery where the mistake is known to the payee	471	(2)
Recovery in cases of payments not involving negotiable instruments	473	(21)
Payor's liability and payee's entitlement	473	(4)
Nature of operative mistake	477	(3)
Defences	480	(1)
Change of position	480	(8)
Good consideration	488	(4)
Estoppel	492	(2)
Action against a collecting bank	494	(6)
Recovery problems in cases of negotiable instruments	500	(6)
Special problems	500	(1)
Nature of operative mistake	500	(3)
Payee's change of position	503	(3)
Proprietary restitutionary claims	506	(6)
At common law	506	(4)
In equity	510	(2)
The Giro System and Electronic Transfer of Funds	512	(69)
Introduction and basic concepts	512	(10)
The nature of a giro transfer	513	(1)
Terminology	514	(1)
Credit and debit transfers	515	(1)
Clearing and settlement	515	(4)
Clearing systems and clearing rules	519	(1)
International funds transfers	520	(2)
Domestic giro forms and their comparison with cheques	522	(6)
Individual money transfer forms (bank giro credit transfers)	522	(1)
Standing orders	523	(1)
Direct debiting	524	(2)
Comparison of giro forms with cheques	526	(2)
The clearance of giro transfers	528	(9)
Paper clearing and electronic clearing	528	(1)
The manual clearing procedure	528	(2)
Clearance through BACS	530	(2)
Clearance through CHAPS	532	(1)
CHAPS sterling	532	(3)
CHAPS euro	535	(1)
NewCHAPS	536	(1)
International money transfers	537	(5)
Methods in use	537	(1)
The use of bankers' drafts	538	(1)
Mail and telegraphic transfers	539	(2)
SWIFT transfers	541	(1)
The legal nature of money transfer orders	542	(22)
The problem area	542	(2)
Are money transfer orders negotiable instruments?	544	(2)
Is a money transfer order an assignment?	546	(3)
Position of the originator's bank	549	(7)
Position of the correspondent (intermediary) bank	556	(2)
Position of the beneficiary's bank	558	(6)
Time of payment and countermand	564	(14)
Complexity of the problem	564	(2)
Cases involving countermand of payment and reversals of credit entries	566	(8)
Cases involving payments out of time	574	(3)
Comparison of the two types of cases	577	(1)
Confidentiality of information	578	(3)
Payment Cards	581	(35)
Available cards reviewed and classified	581	(3)
Tripartite credit cards	584	(3)
Charge cards	587	(2)
Cheque 'guarantee' cards	589	(4)
Debit or EFTPOS cards	593	(1)
Cashcards	594	(3)
Electronic purses or digital cash cards	597	(1)
The provisions of the Consumer Credit Act 1974	598	(10)
Cards affected: meaning of 'credit token' and 'credit-token agreement	598	(5)
Misuse of cards	603	(2)
Unsolicited credit tokens	605	(1)
The credit-token agreement	606	(1)
Nexus with underlying transaction	607	(1)
Distance marketing	608	(1)
Criminal proceedings for misuse of card	609	(3)
Payment cards and the Banking Code	612	(4)
Application of the Code to 'cards' and 'electronic purses'	612	(1)
Liability for misuse	612	(2)
Other provisions	614	(2)
The Bank's Role in Collecting Cheques	616	(40)
The bank's role in the transaction	616	(1)
The true owner's cause of action	616	(6)
Collection and discount distinguished	622	(3)
The collecting bank's protection	625	(14)
Background: section 82 and section 4	625	(1)
Analysis of section 4(1)	626	(2)
Negligence: general standard	628	(2)
Negligence in opening an account	630	(3)
Negligence in collection: frauds by employees, trustees, and agents	633	(2)
Negligence related to crossings	635	(2)
Negligence related to indorsements	637	(1)
Negligence: summary	638	(1)
The defence of contributory negligence	639	(2)
The discounting bank's protection	641	(2)
The processing bank's position	643	(4)
The collecting bank which is also the paying bank	647	(4)
The collecting bank's duty to its own customer	651	(5)
The nature of problems arising	651	(1)
The collecting bank's duty to effect presentment	652	(3)
Notice of dishonour	655	(1)
Incidental Services Performed by Banks	656	(31)
The common thread	656	(2)
Bankers' references	658	(17)
The rights of the person investigated	658	(4)
Position of the enquirer	662	(13)
Giving advice on financial investments	675	(5)
The banker as bailee and custodian	680	(7)
Safe deposit services	680	(3)
Items deposited by foreign banks	683	(1)
Safe deposit boxes	684	(3)
PART III THE BANK AS FINANCIER AND LENDER IN DOMESTIC TRANSACTIONS
Current Account Financing and Loans	687	(58)
Overdrafts and loans compared	687	(2)
Overdrafts	689	(17)
Prevailing practice	689	(1)
The legal nature of an overdraft	690	(4)
The right to charge interest	694	(5)
Appropriation of payments	699	(4)
Consumer credit aspects	703	(3)
Bank loans	706	(10)
Scope	706	(1)
Review of the transaction by the bank	707	(5)
Consumer credit implications	712	(4)
Syndicated loans	716	(9)
Distinguishing between syndicated loans and loan participations	716	(1)
Mechanics of syndication	717	(1)
Terms of a syndicated loan agreement	717	(2)
Legal nature of a loan syndicate	719	(3)
Loan participations	722	(3)
Lender liability	725	(20)
Pre-contractual negotiation	725	(3)
Management and termination of the facility	728	(4)
Insolvency of the borrower	732	(3)
Environmental liability	735	(1)
Indirect consequences	735	(2)
Direct liability	737	(6)
Conclusion	743	(2)
Securities for Bankers' Advances: The General Part	745	(14)
Nature, purpose, and classification of securities	745	(5)
The nature of 'security'	745	(3)
The purpose of security	748	(1)
Classification of securities	748	(2)
The effect of valid security in insolvency	750	(2)
The right of redemption	752	(2)
Effect of the Consumer Credit Act 1974 on securities	754	(5)
Basic terms and structure of Part VIII of the Act	754	(2)
Form of security	756	(1)
Information to be supplied by the creditor	757	(1)
Realization of security	757	(1)
Anti-evasion provision	758	(1)
Proprietary Securities	759	(36)
Scope	759	(1)
Mortgages over land	760	(17)
Introduction	760	(1)
The subject-matter of the security	761	(1)
Legal and equitable mortgages and equitable charges	762	(2)
Protection of mortgagees	764	(1)
Second or subsequent mortgages	765	(1)
Priorities	766	(2)
Tacking	768	(1)
Remedies of mortgagee	769	(3)
Protection of mortgagor	772	(2)
Common clauses	774	(1)
Effect of the Consumer Credit Act 1974	774	(1)
Effect of the Financial Services and Markets Act 2000	775	(2)
Proprietary securities over goods	777	(4)
General considerations	777	(1)
Chattel mortgages	778	(1)
Hypothecation	778	(3)
Effect of the Consumer Credit Act 1974	781	(1)
Securities granted by companies	781	(14)
Nature and flexibility of companies' charges	781	(2)
Fixed and floating charges	783	(2)
Registration of company charges	785	(2)
Priorities	787	(2)
Special rules governing floating charges	789	(2)
Crystallization of floating charges	791	(3)
Assessment	794	(1)
Possessory Securities	795	(12)
The pledge	795	(8)
Utilization of pledges by banks	795	(2)
Standard conditions in pledges and rights conferred on banks	797	(1)
Pledge of negotiable instruments and marketable securities	798	(1)
Pledge by means of documents of title	799	(2)
Field warehousing	801	(1)
Effect of the Consumer Credit Act 1974	802	(1)
The banker's lien	803	(4)
Choses in Action as Security	807	(39)
General principles	807	(3)
Security over book debts and other receivables	810	(15)
Meaning of 'book debts' and 'receivables'	810	(1)
'Receivables financing'	811	(1)
Fixed or floating charge?	812	(3)
Restrictions on assignment	815	(3)
Registration, and the effect of failure to do so	818	(2)
Priorities	820	(4)
Asset Securitization	824	(1)
Bank balances as security	825	(8)
Basic problems	825	(1)
Security to a bank with which funds are deposited: set-off in equity and insolvency	826	(1)
Security to a bank with which funds are deposited: contractual set-off and flawed asset arrangements	827	(3)
Charges over bank balances	830	(3)
Life policies as security	833	(3)
Stocks and shares etc. as security	836	(10)
Stocks and shares etc. as security	836	(2)
Types of security: legal mortgage and equitable mortgage or charge	838	(1)
Advantages and disadvantages of equitable mortgage or charge	839	(2)
Advantages and disadvantages of legal mortgage	841	(2)
Priorities	843	(1)
Registration	844	(2)
Guarantees	846	(17)
Definitions and distinctions	846	(2)
Formation	848	(1)
Co-extensiveness	849	(2)
Vitiating factors	851	(2)
Interpretation of guarantees	853	(2)
Discharge of the guarantor	855	(4)
Rights of the guarantor	859	(2)
Acceptance credits	861	(2)
Index	863