1. This is an appeal by the Official Assignee against an order of the learned Chief Justice sitting as Commissioner in Insolvency.
2. The facts are not in dispute. The respondent had, on the 5th August 1906, Rs. 600 standing to the credit of his current account with Arbuthnot & Co. On the above date he wrote to Arbuthuot and Co. and requested them to buy on his behalf a Government Promissory Note for Rs. 1,000, when the amount of his current account reached that sum. On the 30th September 1906 he again wrote and requested Arbuthnot & Co. to buy the promissory note as there was then Rs. 1,000 to his credit. He received no reply up to the 10th October. He then called at the Bank and was told by two officers of the Bank that his instructions would be carried out in due course. The promissory note had not, however, been purchased when Arbuthnot & Co. suspended payment on the 22nd October 1906, though it could have been bought for Rs. 5,000 between the 30th September and the 22nd October. On these facts the learned Commissioner held that Avbuthnot and Co, held the sum of Rs. 1,000 in a fiduciary capacity, and directed the Official Assignee to pay the whole amount to the respondent.
3. As pointed out in my judgment in O.S. Appeal No. 27 of 1908, it was competent for the respondent to give such directions with regard to the money standing to the credit of his current account as would thereafter cause Messrs. Arbuthnot & Co. to hold the money in fiduciary capacity. The effect of his order to them to buy was the same as if he had attended in person at the Bank, drawn his money, as he was entitled to do at any time and then placed it in the hands of Messrs. Arbuthnot & Co. for the specific purpose of buying the promissory note. In the face of the respondent's specific directions, Messrs. Arbuthnot and Co. were not entitled to use the money as their own but clearly held it in a fiduciary capacity. For the appellant, In re Barnet's Banking Company, Ltd. Massey's case (1870) 39 L.J. Eq. 635, is relied upon. There one Massey paid into a Bank a certain sum with instructions to remit it to another firm. Next day the Bank stopped payment without having made the remittance. It was held that Massey had only the right to prove with the general creditors, as the Bank stopped payment before taking any step to apply the money as directed. I am, with great respect, unable to see how this circumstance could affect the character of the money in the hands of the Bank. It was money which the Bank was clearly not entitled to use as its own. Heber Hart in his 'Law of Banking'' 2nd edition, page 146, makes the comment in a footnote that the decision seems of doubtful anthority, and we have not been referred to any case in which it has been followed. In King v. Hutton (1900) 2. Q. B. 504, it was pointed out that where a stock-broker receives from his client a sum of money for the purchase of stock, he has only a special property in the money so handed to him for a specific purpose and if he became bankrupt while the stock was unpurchased the money would not go into the general account in the bankruptcy. The same principle would, I think, apply when money is handed to a Banker for the specific purpose of purchasing securities and, as has been shown, that is, in effect, the position in the present case. In Prince v. Oriental Bank Corporation (1878) 3 A.C. 325 it was observed that the decision in D.E. Bernales v. Fuller (1811) 14 East. 590 might be supported on the ground that money had been paid in specifically for the payment of the particular bill and had been accepted by the Bankers for that purpose and that they made themselves, by so accepting the money, agents to hold it for the plaintiffs. Again in Vaughan v. Halliday (1874) L.R. 9 Ch. A.C. 561 mention is made of the rule of law that if a remittance is sent for a specific purpose the person who receives the money must either apply it for the purpose for which it is sent or else return it. I think the order of the learned Commissioner is right and would dismiss the appeal with taxed costs to be paid out of the estate.
4. The appeal is dismissed accordingly.
Abdur Rahim, J.
5. One Lupprian, who had a current account with Arbuthnot & Co., had to his credit on the 5th August 1906, Rs. 600, and on that date he wrote to Arbuthnot and Co. requesting them to buy for him a Government Promissory Note for Rs; 1,000, when the balance to his credit reached the sum of Rs. 1,000. On the 30th September, the amount to his credit then being Rs. 1,000, Lupprian informed the Bankers of the fact and asked them to buy a Government Promissory Note for the amount. On the 10th October he, not having received any reply to his letter, interviewed some of the officers at the Bank who told him that no reply was necessary as his instructions would be carried out in due course. But in fact Arbuthnot and Co. never bought any promissory note before they stopped payment.
6. I think the reasoning which I. have applied to Ramachandra Iyer's case O.S.A. 27 of 1908 also applies to these facts. The only difference between the two cases is that in the former the customer asked the Bankers to pay the money to himself while in the latter he asked him to invest the amount due from them ' in Government Promissory Notes. Having regard to the usual course of business of Bankers, I shall take it that Arbuthnot & Co were under an obligation to buy the Government Promissory Note for Supprian just as they were in the other case to repay to Ramachandra Iyer the amount due to him. And it may be that their failure to invest the money as directed would entitle Lupprian to recover damages for breach of that contract. But the question here is : Did the direction given by Lupprian to his Bankers to buy Government Promissory Notes, followed by a promise on their part to carry out the direction, have the effect of making them bailees or trustees with respect to the amount in question? Such a case does not fall within' the rule established by In re Hallet's Estate (1880) 13 Ch. D. 696 : Burdick v. Garrick (1869) 5 L.R. 5 Ch. A. 233 and Gibert v. Gonard (1885) 54 L.J.N.S. 439 and similar cases, nor, in my opinion, does it come within the meaning of that rule. As I have said, before you can make the rule applicable you must first of all find an entrustment or bailment. But it is argued that there is nothing to prevent a debtor consenting to hold the amount due from him as agent or bailee, for the purpose of applying it in the manner designated by the creditor. For instance, in this case, it is said it would be unreasonable to insist that Lupprian should have gone to the counter of Arbuthnot & Co., and received the Rs. 1,000 due to him and then and there handed over the amount again to them for buying Government Promissory Notes. I think there is force in this argument in so far that the law would not insist upon a mere superfluous formality if there is evidence of some unequivocal act on the part of the debtor showing that he had changed his position into that of a bailee with respect to the money due from him. Obviously a mere promise to carry out the directions of the customer, so long as he does nothing towards appropriating the money to any specific purpose, will not suffice, for such a promise can have no higher legal effect, so far as the present question is concerned, than a promise to pay the debt. Something has to be. done which would enable the Court to say that a particular sum is held by the Banker as trustee 01 agent for some specific purpose and which he is not therefore entitled to use but which he is bound to keep apart from his own money. It may not be necessary to separate the amount physically by tying it up in a bag or otherwise, and the law would, I apprehend, regard it as a sufficient act of separation or appropriation if, for instance, an entry to that effect were made in the Banker's books of accounts. Here nothing was done by Arbuthnot & Co. towards appropriating the Rs. 1,000 to the purpose of buying any Government Promissory Notes and the matter rested in the mere promise when they became bankrupt. In taking this view of the law I am not going so far as Massey's case (1870) 39 L.J.635 in which it was held that when money is received by a Banker to be applied in a specific manner and that Banker stops payment before taking any steps towards applying it for that purpose, the payer cannot recover the money paid, and I shall have something more to say hereafter regarding that case. But I am distinctly of opinion that to hold that Arbuthnot and Co. ever assumed any fiduciary character in respect of the money sought to be recovered would be going much further than what these authorities warrant or the principles of equity would justify.
7. I hold, therefore, that Lupprian has only a right of proof as a creditor of Arbuthnot & Co., and the appeal ought to be allowed with costs.