GUARANTEE TO BANE

Hokitika Guardian, 3 July 1928, Page 4

GUARANTEE TO BANE

CLAIM FOR REFUND. A AVEST COAST CASE. CHRISTCHURCH, June 30. Legal argument was heard yesterday by AJr Justice Adams in a c-lnini arising out of a guarantee given to a bank in respect to a customer’s account. Harry Digby James, of Greymouth, printer, claimed £2,500 from Edward Ernest Bayly Alabin, of Nelson, bank manager.

The statement, of claim set out that when Mabin was manager of the Bank of New South Wales at Greymouth, he advised James to enter into a guarantee of tho account of E.J. Bundle and Co., timber merchants. In September fast, the bank demanded from James and two other guarantors payment of £32.000. To secure a veleasa or his liability, James paid the bank £2..100. The company was unable to pay that sum to James. He alleged that, to induce him to enter into the guarantee, Alabin fraudulently and falsely represented that the company’s financial 'position was quite sound. James lincl discovered since that the representations made to him by Alabin were untrue, and that Alabin’s novice was given recklessly. James therefore claimed the sum of £2500. The case came up in the form of argument of issues of law befoie ti ial. Mr Murdoch, with Air Hannan appeared for James, and Air Myers, K. C., with him Air AA’ard for Alabin. 'Mr Mvei-s said that if Hie action went to trial, it would involve great expense to both parties. Tt appeared to defendant’s advisers that the statement of claim was demurrable and disclosed no cause of action. The Court was very chary in regard to striking out a statement of claim on tho ground that it was frivolous am vexatious, but the question might he disposed of ,bv the application of wellknown elementary principles of law. Tho action was based on fraud pure and simple. It must not be assumed that the allegations of fraud were admitted by Mabin, but necessarily they

were admitted for the purpose c! raising the point- that there was no cause of net>'on. The ease was based on fraud.and fraud alone, and could not be based on anything else Alabin was not advising James in regard to an investment, but was inducing him to enter into a contract with the bank. James’s case was that .Alabin induced him to sign the guarantee by fraudulent misrepresentation. -James therefore was not. liable to the bank: the guarantee was void or voidable because fraud vitiated any contract. James chose voluntarily to pay the bank £2500, which, according to his own case, lie need not have paid. The whole cause of action had gone.

Mr Murdoch said that counsel’s arguments might properly be addiessed To his Honour after evidence bad been called. Evidence wetilcl show that

Alabin acted beyond the scope of his authority as manager of the Greymouth branch. AA’hen lie found that lie was in a difficult position, he obtained the guarantee for his personal

protection. llis Honour: Do you say that he; was not the bank’s agent?—Exactly. You don't seriously dispute the fact that ho was manager, and that in the bank’s business ho would act R>r the bank?--AA’e say it was not bank business. AVhom do you say lie acted for when lie went to James’s house and persuaded him to give the guarantee?— For himself. Mr Murdoch said that Alabin tool: James’s signature as a bank manager, but made tho alleged false statements as a person. His Honor: Don you say that the guarantee was obtained by fraud?— A'es, your Honor. His Honor: The main answer to thatis that, if it is fraud, the bank could not recover a penny from the guarantor. If that is so, James’s payment of £2500 to the bank was voluntary. Do you say it was fraud dissociated from tho bank?—A'es, your Honor. Do I understand you to say that the bank was not implicated?—Quite so. His Honor: AA’ell—— Mr Hannan said that there was no allegation in the statement of claim that Alabin made his statements for the bank. It was nowhere alleged in the statement of claim that Alabin acted as the bank’s agent. It was not the business of a bank manager to seek guarantors of accounts. That duty usually rested with clients whose accounts had to bo guaranteed. Alabin went far beyond a bank manager s duty. The statements complained of were made by Alabin before the signing of the guarantee. Air Myers said that Mr Alurdoch admitted that Alabin took the guarantor’s signature as bank manager. His personality could not be dissociated with him as manager when he was doing something within the scope cf his duties, in tho hank’s interests. If ho had authority to take the guarantee the bank was responsible for any fraudulent statement he might have made in securing the guarantee. Judgment was reserved.