Scottish Court of Session Decisions

In September 1887 Mrs Elizabeth Melrose became a depositor with the Edinburgh Savings Bank, established under the Savings Banks Acts Amendment Act 1863. In January 1895 her sister stole her deposit-book, presented it at the bank, forged her signature to a requisition for the withdrawal of £50, and obtained payment from the bank of that sum. The sister was apprehended, and convicted of the theft and forgery shortly afterwards. Mrs Melrose applied to the bank for repayment of the £50 thus withdrawn from her account, but this was refused. On 18th June 1896 she intimated to the trustees of the bank through her agent that she was about to raise an action against them, and on 24th June 1896 she withdrew the whole balance remaining at her credit in the bank's books, amounting to £15, 13s. 6d.

In these circumstances on 6th July 1896 Mrs Melrose raised an action against Robert Adam and others, trustees of the Edinburgh Savings Bank, under the statute, concluding for payment of £50, and averring that the officials of the bank had been guilty of negligence in making the payment in question.

The defenders founded in the first instance upon section 48 of the Savings Banks Acts Amendment Act 1863 (26 and 27 Vict. cap. 87), which is as follows—“If any dispute shall arise between the trustees and managers of any savings bank and any individual depositor therein, … the matter in dispute shall be referred in writing to the barrister-at-law appointed under the said hereby repealed Acts, or this Act, who shall have power to proceed ex parte on notice in writing to the said trustees or managers, left or sent through the post-office by the said barrister to the office of said savings bank, and whatever award, order, or determination shall be made by the said barrister shall be binding and conclusive on all parties, and be final to all intents and purposes without any appeal.”

That Act has been amended by the Act 39 and 40 Vict. cap. 52, section 2—(1) … “The powers and duties relating to any dispute arising between the trustees and managers of any savings bank, … on the one hand, and any depositor or person claiming through or under a depositor on the other hand, shall be transferred to and vested in the Registrar, as defined by the Friendly Societies Act 1875.”

Section 4 of the Friendly Societies Act 1875 (38 and 39 Vict. cap. 60) enacts—“The Registrar means … for Scotland of Ireland, the Assistant Registrar for either country respectively.”

The defenders further relied upon certain Treasury regulations and rules of the bank, which need not be cited here, but which

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may be briefly stated to exempt the managers of savings banks from liability for money paid away on presentation of the depositor's pass-books, though without the authority of the depositor.

The pursuer in answer averred ignorance of these rules.

The defenders pleaded, inter alia—“The action is incompetent, et separatim, is barred by the arbitration clauses in the Act of Parliament condescended on.”

On 3rd December 1896 the Lord Ordinary ( Kincairney) found that the dispute between the parties fell to be decided by reference under the statutes libelled, and dismissed the action.

Opinion.—“This is an interesting and important case. It is an action against the trustees for the Edinburgh Savings Bank for payment of £50. The pursuer avers that on 28th January 1895 the bank paid that sum, which was standing at her credit in their books, to her sister. She avers that her sister obtained payment by stealing her passbook, and by forging an order or requisition for withdrawal of the money, and by presenting the passbook and forged order to the bank. The defenders admit that the £50 was paid to the pursuer's sister. They do not admit that the order on which it was paid was forged, but they contend that they are not responsible even if it was. The question between the parties, therefore, is, whether payment by the defenders to to the pursuer's sister relieves them in the circumstances of the obligation to pay to the pursuer the money which she had deposited, or supposing the case clear of specialties in fact, the question expressed with its greatest generality is, whether a depositor in a savings bank or the bank loses by a forgery.

The pursuer appeals to the common law, the defenders to regulations of the Treasury and rules of the bank, which are, they say, authoritative, and to which they say the pursuer has assented, and by which they are, as they maintain, protected. That is the very important and general question raised in this case.

But there is a preliminary question stated in the defenders' first plea, viz., that the action is barred by the arbitration clauses in the Acts of Parliament.

The primary provision on which the defenders found is section 48 of the Act 26 and 27 Vict. c. 87, which provides—[ His Lordship here cited the sections of the statute quoted above].

The language of this enactment appears to be very distinct, and I have not been able to see how its application can be avoided, or how it can be denied that the question raised by this action is a dispute between the trustees and an individual depositor in the bank, who claims to be entitled to money ‘deposited in the bank.’ The words seem to apply exactly.

I do not understand that the application of the statute and of the above section of it to the defenders' bank is disputed, but the pursuer has pleaded that the question is not a dispute within the meaning of the statutes. This plea was supported mainly by reference to the case of Symington's Executor v. Galashiels Co-operative Store Company, Limited, January 13, 1894, 21 R. 371, but I think the case inapplicable.

The question in that case arose under the Industrial and Provident Societies Act 1876 (39 and 40 Vict. cap. 45). The action was by the executor-dative of a deceased member for recovery of a sum claimed as due to the deceased, and the defence was that the sum claimed had been paid to certain of the next-of-kin of the deceased. It was considered that the defence imported a denial that the pursuer had the rights of a member, and it was held that a clause providing that disputes between members—or those suing in right of members—and the society should be referred to a committee of the society was inapplicable, because, while the statute provided a domestic tribunal for ascertaining what the rights of members were, it did not empower the committee to determine whether a party was or was not a member. That was held to be a proper question for the Court. It might perhaps be said that the Court, after deciding that the pursuer was entitled to the rights of a member, went on to determine what these rights were, but upon that point there was truly no dispute.

The pursuer sought to assimilate that case to this by representing that, as in that case, the defence imported a denial that the pursuer had the rights of a member, so here the defence imported a denial that the pursuer was a depositor. But I think the cases are altogether different. The relations of a member of an industrial and provident society to the society are wholly different from those of a depositor to a savings bank. The latter is not a member of the bank, but only an ordinary creditor, subject to certain conditions. There is nothing of the nature of a domestic tribunal provided, but only a comprehensive clause of reference; and I think it is a mere play upon words to say that when a savings bank, in an action brought by a party as a depositor, pleads that the money in question has been paid, that is to be held as a denial that the party is a depositor. In this case the pursuer does not aver that the withdrawal of the £50 took from her the position of a depositor, and in point of fact it did not, for her passbook shows that £14, 19s. 4d. was left deposited to her credit in the bank.

It was maintained that the question here raised was not the sort of question referred to in the arbitration clauses; and here again reference was made to the case of Symington, in which an opinion to that effect was expressed on the bench in relation to the question there raised. There the tribunal was so constituted as not to be, in the opinion of the Court, adapted to the trial of a question which was thought to involve the construction of the statute, and also so constituted as apparently to make the society judge in its own cause. But in this case the arbiter—the Assistant Registrar—is presumably, in the strictest sense, impartial; and it would be absurd to represent that an official whose statutory qualifications involve legal training and

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practice was to be presumed unqualified to construe the statute which he was appointed to administer.

If a dispute as to whether money deposited was paid or not be not a dispute with a depositor comprehended in the clause about arbitration, it is difficult to understand what sort of dispute with a depositor would be comprehended.

It may seem a little startling that so general a question as this, whether a savings bank or its depositor should suffer from a forgery, should be withdrawn from the cognisance of the ordinary Courts, so that apparently it is a question which can never be authoritatively determined; still, that appears to be the effect of the statute, the terms of which are too plain to admit of question, and, in my opinion, they necessitate the conclusion that the question here raised must be submitted to the Assistant Registrar.

I think that the policy of the Act was to protect savings banks and their depositors from the cost of ordinary litigation, and to provide that disputes between them should not come into Court at all; and it seems to me that that policy would be best carried out by dismissing this action. Still, if the parties think it better that it should remain in Court to abide the issue of a reference to the Registrar, I do not object to sist it.

Seeing that I am thus debarred from deciding the question raised, and that question falls to be decided by the Assistant Registrar, it would be obviously improper to indicate any opinion on the merits.”

The pursuer reclaimed, and argued—The Lord Ordinary was wrong. At the time of raising the action the pursuer had ceased to be a depositor in the savings bank, and therefore her claim, the character of which must be judged as at the date of raising the action, did not fall within the reference clause in the statutes. The merits of the case depended upon the construction of statutes like 50 and 51 Vict. cap. 40, which dealt with the approval of regulations made by trustees of savings banks, and the construction of Acts of Parliament was for the Court, not for an arbiter. The case was on all fours with Symington's Executors v. Galashiels Co-operative Store Company, Limited, January 13, 1894, 21 R. 371; Prentice v. London, 1875, L.R. 10 C.P. 679; and Willis v. Wells [1892], 2 Q.B.D. 225, also referred to.

Counsel for the defenders was not called upon.

At advising—