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Lloyd’s Bank Plc V. Independent Insurance Co. Notes

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LLOYD'S BANK

PLC V.

INDEPENDENT INSURANCE CO.

FACTS W.F. was an insurance agent which solicited business on behalf of insurers, including Independent. Under the terms of its agreement with Independent it was authorised to receive premium from assureds on Independent's behalf, and obliged to remit the same to them net of commission. At the beginning of July 1995 W.F. owed at least PS162,387.90 to Independent in respect of premium received from an assured called David Glass & Associates. W.F. had, as recently as 30 June 1995, opened another account at the Warminster Branch of Lloyds Bank, which, as at 5 July 1995, had a credit of PS982. A fax was sent from WF To Lloyd's bank that said: "As advised, a sum of PS16 7,621.61 will arrive by CHAPS today. As soon as this happens, please send PS162,387.90 by CHAPS to: Royal Bank of Scotland" No CHAPS payment arrived on 12 July 1995 or at all. Instead, on 14 July 1995 Mr. Beckingham came to the bank in person and paid in three cheques totalling PS172,131.97 including a cheque for
PS168,000 drawn in favour of W.F. by a company called Kaffco Ltd.... Mr. Flagg replied that payment could be made only after the cheques had cleared, three working days later, on 19 July 1995. Before the Kaffco cheque had been cleared, the bank paid
PS162,387.90 to Royal Bank of Scotland by CHAPS transfer for Independent's account. A CHAPS transfer is an instantaneous electronic interbank transfer which is irrevocable, as between banks, once made. The payment was made at this stage because two of the bank's employees mistakenly believed that the value of the cheques entered on W.F.'s account on 14 July 1995 represented cleared funds. Shortly after the CHAPS payment had been made, the branch was notified that the Kaffco cheque had in fact been dishonoured. The bank immediately made a contra-entry on W.F.'s account (debiting the value of the cheque) and putting the account substantially into overdraft. Now, the bank seeks to recover this amount from Independent Ltd. HOLDING WALLER LJ On the basis of the interpretation of communication between WF and the bank and in particular, the meaning assigned to the words "as soon as possible" by the parties, he concluded thus, "in the

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