What a Payment Is (And How it
Continues to Confuse Lawyers)
Rhys Bollen
Contents
Author's Note: This paper is based on
material presented by
Professor Hooley in his classes on International banking and financial
law, particularly discussion classes on payment systems (University of
Cambridge, LLM program, 2004/05). The views in this article
however,
including any errors or omissions, are the author's only. The paper is
based on the law as at 12 February 2005.
Introduction
We instinctively know a payment when we
get one. Our wallet bulges, or our bank balance looks a little
healthier. But what is a payment
really? How do they work?
Unfortunately, as this article shows, payment facilities continue to
confound us and the law. "If the concept
of money is difficult, it has
at least been the subject of exhaustive analysis. The same cannot be
said of the concept of payment,
itself a subject of considerable
complexity, upon which the literature in common law jurisdictions
remains remarkably sparse."[1]
Recent cases, such as R v Preddy[2]
and Holmes,[3]
demonstrate the difficulty our legal
system has with payment facilities. This article begins with an
analysis of what a payment is.
It looks at the history of payments,
their main modern forms and economic substance. This is followed by a
discussion of the above
cases and the legislative response in England.
The final section discusses some shortcomings in the current
legislation and possible
approaches to reform. Analysis
of what a payment is
Payment has broad
and narrow meanings, both in law and general usage. Its broadest
meaning in general usage is to direct something
towards or do something
for someone else, such as 'to pay someone a visit' or 'repay a favour'.
In financial contexts, it means to
give consideration for a purchase or
discharge a debt. It is inherently circular - what the parties agree is
payment is payment.
Goode states "any transfer of value in a form
according with the express or implied agreement of the parties
constitutes payment,
whether or not it is money in the legal sense".[4]
For the purposes of this article, we
will define payment as a transfer of buying power or economic value,
usually to discharge a
debt obligation. It can be conducted using
currency, commodities (eg wheat or precious metals) or through a
payment mechanism. Geva
defines a payment mechanism as "any machinery
facilitating the transmission of money in the payment of a debt, which
enables the
debtor to avoid the transportation of money and its
physical delivery to the creditor in the discharge of the debt."[5]
History
Ancient payment facilities actually involved transfers of underlying
property or debt rights. For example, payments involving gold
and other
precious metal receipts involved a transfer of some of the rights of
the person making the payment ("payer") to the recipient
of the payment
("payee"). Before the payment the payer owed the payee some money, and
the payer also had the right to collect a certain
amount of gold from
the goldsmith. By the payer transferring receipts evidencing the right
to collect gold, the payer 'paid' the
payee by delivering to them the
right to collect a quantity of gold equivalent in value to the value of
the debt. Provided that the
payee was happy with this arrangement, it
resulted in a discharge of the debt and an assignment from the payer to
the payee of rights
to the underlying gold.[6]
In most countries the law provides
that in the absence of agreement, the tender of cash[7]
is the default means of payment.[8]
Physical delivery of notes and coins
can make a payment, simultaneously transferring property in the
physical currency to the recipient
and discharging the indebtedness of
the giver. No payee can be forced to accept a non-cash payment as good
payment, so the payer
would either have to obtain their express
agreement or be able to rely on an implied[9]
consent.[10]
Modern payment facilities involve
payer and the payee agreeing that something other than cash will be
good consideration.[11]
The reasons for accepting payment
by means other than cash are many and varied. Regardless, non-cash
payments are effective because
the payer and payee are willing to
proceed on the basis that the payment method they have adopted is
effective to transfer money
between them.[12]
Modern
payments
Most modern payment schemes
build upon a simple 'debt circulation' model.[13]
Prior to a payment, the payer owes
the payee money. Through the payment transaction, this monetary
obligation is discharged. The
payer also has a relationship with a
financial intermediary[14]
(the "payer FI") who agrees to
make payments from time to time as instructed by the payer. Generally
these payments are made either
out of funds already deposited with the
payer FI, or funds to be paid by to the payer FI later. Where money has
been deposited with
the payer FI in advance, this money is held in the
form of a debt due from the payer FI to the payer.[15]
Where no funds have been deposited
in advance, the relationship is reversed - each payment results in the
payer FI effectively lending
funds to the payer.[16]
The essence of making a non-cash
payment is that the payer causes the payee to receive valuable rights,
usually in the form of an
increased debt due from the payee's financial
intermediary (the "payee FI"). The payee FI may or may not be the same
financial intermediary
as the payer FI. At the completion of the
payment transaction, the payee is owed money (or more money)[17]
by the payee FI and the payer is
owed less money by the payer FI[18]
This process has been described
elsewhere as the circulation of debt obligations.[19]
A debt obligation between payer
and payee is satisfied by the payer causing the debt due to them from
the payer FI to be reduced
and the debt due to the payee from payee FI
to be increased. The debt from the payer to payee has been substituted
for a debt due
from the payee FI to the payee.[20]
Debt obligations have been
substituted rather than strictly circulated,[21]
so as to effect a payment between
the parties. Funds
'transfers'
Modern payment systems do
not generally involve an assignment of underlying rights.[22]
Instead, they result in the
increase and decrease in institutional liabilities owed to the payer
and payee.[23]
Under a Giro payment system, for
example, a payer instructs the payer FI to effect a payment to the
payee. Assuming the payer has
sufficient funds in their account (or
that there is an agreed overdraft or credit facility in place), the
payer FI debits the payer's
account and instructs the payee FI that a
payment is to be made to the payee. Naturally, the payee FI will
usually only give effect
to this instruction if the payment is covered
either by funds the payer FI already has on deposit with the payee FI
or by a second
payment. In the latter case, the payer FI makes a
payment to the payee FI so that the payee FI is 'in funds' and is in a
position
to credit the payee's account to the value of the intended
payment. This is generally achieved by debiting the payer FI's account
with a third party and crediting the payee FI's account with that third
party.[24]
This type of transaction has
unfortunately come to be known as a funds transfer. Unfortunate in that
it is a slightly misleading
label, even a misnomer.[25]
No property is transferred through
this process. The payer and payee both hold intangible property[26]
both before and after the
transaction. Neither acquires or disposes of these chattels during the
transfer (at least not to each other).
These chattels are not
transferred. Instead, new rights are created or existing rights are
altered. It is probably more accurate
and helpful to talk of a transfer
of value rather than a transfer of funds. In
some cases, property may be created or terminated. Where a payer's
balance with the payer FI is exhausted by the transfer, this
may
terminate the chose in action. This chose is not transferred; it simply
comes to an end. Also, where a transfer results in the
payee having a
balance with the payee FI for the first time, a chose in action will be
created through the transaction. Courts have
recognised this principle.
For example, Millet LJ stated in Foskett v McKeown that no money or
property passes through the payment
system.[27]
Instead, the system is "simply a
series of debits and credits that are causally and transactionally
linked".[28]
Economic
substance
As a result of this sequence
of payments, the payer's balance vis-à-vis the payer FI and
the payee's balance vis-à-vis
the payee FI have moved in
opposite directions but by the same[29]
quantum. They have achieved a
transfer of money without any direct dealings and without any physical
currency or other inherently
valuable physical chattels changing hands.
In fact, with electronic payment mechanisms all that may have 'moved'
may have been sounds
and data travelling through the relevant
communications systems.[30]
At the end of the process, the
payee has received (a present entitlement to)[31]
the sum of money promised, the
payer's money held with the payer FI has been reduced by that sum and
the FI's own net positions have
each been maintained (see diagram 1).[32]
Diagram 1
What is the economic substance of a payment
transaction? Two parties effect a change in their relative wealth, by
agreeing to change
their positions vis-à-vis third parties.
Both have debt relationships with third parties, and the payment
mechanism is used
to increase the debt a third party owes the payee and
reduce the debt a third party owes the payer. The values of these
choses in
action are altered to achieve the movement in buying power or
wealth. The payer, in making a non-cash payment, sets in train a course
of events at the end of which its monetary rights are worth less and
the payee's monetary rights are worth more. Provided that the
payee is
willing to treat this as a valid payment, it is good consideration for
the purchase or effective discharge of the existing
debt.[33]
Payment, then, is a method by
which the payer intentionally causes the value of the assets of the
payee to increase with the purpose
of discharging an existing debt due
to the payee or otherwise providing consideration to the payee. Just as
physical currency is
a valuable means of exchange because of what it
can do for the holder,[34]
so through a non-cash payment the
payer causes the buying power or wealth of the payee to increase. This
is usually achieved by causing
the payee's account balance with a
financial intermediary to be increased. However, there is no reason why
it could not be achieved
in other ways (such as by causing a third
party to be in debt to the payee or hold other valuable rights for or
on behalf of the
payee).[35]
The essence of the payment is that
the payer does an act that causes the payee's net asset position to be
increased by a known amount,
and that the payee recognises this as a
deliberate act of the payer to deliver value to the payee.
This may be more easily illustrated by way of an
example. Before the transaction, the payer owes the payee
£500. Instead of
tendering cash to repay this, the payer
wishes to cause rights worth £500 to be vested in the payee,
and for the payee to understand
this to be the positive act of the
payer and to accept this as good payment. Provided they both recognise
this as a payment, it is
a payment. Payment is as payment does (so to
speak). Recent
cases and legislation
While the above analysis may appear to reflect a
sensible economic understanding, it is not always reflected in our
legal regime.
Recent cases and legislative changes demonstrate this
complexity. Over the last decade, a couple of key cases have challenged
our
legal understanding of and approach to payment facilities. R
v Preddy
[36]
Preddy and others were accused of obtaining funds
from a Building Society by deception. They applied for loans, and in
doing so gave
the lender material false information. The Building
Society approved them and told its bank to transfer money to Preddy's
account
with another bank. The evidence was that the borrowers falsely
stated their position and were unlikely to have received the loans
otherwise.
When the scheme was detected, Preddy and his
associates were prosecuted. Preddy was accused of breaching section 15
of the Theft
Act 1968, obtaining property by deception. It states:
"(1) A person who by any deception dishonestly obtains property
belonging to another, with the intention of permanently depriving
the
other of it, shall on conviction on indictment be liable to
imprisonment for a term not exceeding ten years.
...
(4)
For purposes of this section
'deception' means any deception (whether deliberate or reckless) by
words or conduct as to fact or
as to law, including a deception as to
the present intentions of the person using the deception or any other
person."
For this offence to have been committed, Preddy
had to have obtained property previously belonging to another. Did
Preddy actually
obtain property belonging to the victim?
What Preddy obtained was an increase to his bank
balance caused by instructions given by the Building Society, and
causally linked
to a reduction in the balance of the Building Society's
own bank account. Preddy was certainly enriched by the scheme, and the
net
wealth of the Building Society was reduced. But was it a theft of
property?
The Court applied a conventional banking law
analysis, and held that no property belonging to the Building Society
was obtained from
it. Instead, Preddy obtained new property rights as
against his own bank to the value of the loan monies advanced. New
rights were
created, existing rights were not stolen. The court held
that the Building Society's account balance with its bank was
intangible
property (a chose in action). However, in making a payment
this item of intangible property was not transferred to the payee
(Preddy).
The Court held, "...
when the bank account of the defendant ... is credited, he does not
obtain the lending institution's chose in action. On the
contrary that
chose in action is extinguished or reduced pro tanto, and a chose in
action is brought into existence representing
a debt in an equivalent
sum owed by a different bank to the defendant ...."[37]
The court found that Preddy had not breached section
15. He had not stolen another person's property, at least not
literally. His
actions were clearly wrongful, but a criminal statute
aimed at conventional property offences did not prohibit them.[38]
As to be expected, this decision
aroused considerable concern in the banking and wider community.
Following the Court of Appeal's
decision in Preddy, a number of
questions of law were put to the House of Lords.[39]
They confirmed that in
circumstances such as those in Preddy, obtaining of a funds transfer
does not involve obtaining property belonging
to another person (but
rather property newly created or varied).[40]
Reforms
leading to section 15A
Following the
Preddy case, reference was made to the Law Commission for England and
Wales regarding possible amendments to the Theft
Act. This resulted in
Law Commission Report 243 "Offences of Dishonesty: Money Transfers"
(1996).[41]
The Commission stated, "[a]s a
result of the decision in Preddy, it is now difficult to prosecute an
individual who obtains by deception
any form of payment by any form of
banking transfer."[42]
The Commission considered various
possible approaches to filling the "lacuna in the law of deception
exposed by Preddy".[43]
These included extending the
offences of 'conspiracy to defraud' and 'obtaining a pecuniary
advantage by deception'.[44]
Through the consultation process,
some suggested that what was needed was an amendment to the definition
of 'property' for the purposes
of the offence provisions. However, the
Commission concluded that the core issue was that a wrongful funds
transfer, as discussed
earlier, does not actually involving the
recipient obtaining property previously owned by the victim. "...as
we understand Preddy, it did not involve any narrowing of the concept
of property: it merely decided that the transfer of funds
from one
account to another cannot be described as an obtaining, by the holder
of the account credited, of the same property as that
lost by the
holder of the account debited. This appears to us to be a problem
arising from the requirements of section 15(1), not
from the concept of
property."[45]
The Commission also took the
view that, "[a]ll the existing deception offences require that the
defendant should dishonestly procure
a specified result by deception,
and the new offence should clearly take the same form...."[46]
As will be seen later, this
requirement of the deception of a second person, in the context of
computerised crime, has proven problematic.
However, the logic of the
new provision was sound, based as it was on the correct understanding
that, "[t]he essence of a money transfer
is the debiting of one account
and the making of an associated credit to another", rather than the
taking of another person's property.
Amongst other things, the
Commission recommended "the insertion into the Theft Act 1968 of a new
section 15A, creating an offence
of dishonestly obtaining a money
transfer by deception.25".[47]
This was adopted and the new
section 15A (in substantially similar form to that set out in Appendix
A to the Commission's report)
is below. "(1)
A person is guilty of an offence if by any deception he dishonestly
obtains a money transfer for himself or another.
(2) A
money transfer occurs when-
(a) a debit is made
to one account,
(b) a credit is made to another, and
(c) the credit results from the debit or the debit results from the
credit.
...
(4) It is immaterial (in
particular)-
(a) whether the amount credited is
the same as the amount debited;
(b) whether the money
transfer is effected on presentment of a cheque or by another method;
(c) whether any delay occurs in the process by which the money transfer
is effected;
(d) whether any intermediate credits or debits
are made in the course of the money transfer;
(e) whether
either of the accounts is overdrawn before or after the money transfer
is effected ..."
Deception has the same
meaning as in section 15 (quoted earlier).[48]
Section 15A recognises that a
fraudulently obtained funds transfer is not theft in the normal sense.
Instead, it is fraudulently
inducing the victim to dispose of some of
their property and causing them to indirectly vest in the offender new
property rights.
Section 15A is a substantial improvement on the prior
position, and will proscribe many forms of payment facility fraud.
However,
as the Holmes case below shows, there are still some material
shortcomings with the current provision.
The Holmes
case concerned important principles of banking law, and the
interpretation of the new section 15A. Holmes, while working
for a
German bank (Commerzbank Aktiengesellschaft AG ("CAAG")), obtained
passwords giving access to the SWIFT[50]
payment communications network. He
used those passwords to initiate funds transfers to his account with a
Dutch bank, ABN Amro Bank.
The funds transfers were for the sum of
£15 million. ABN Amro credited Holmes' account conditionally,
requesting confirmation
from CAAG before finalising the payment.[51]
Using the passwords he had already
obtained, Holmes accessed CAAG's system and confirmed the transfer on
CAAG's behalf. ABN Amro
then proceeded to finalise the payment and it
became unconditional. Holmes withdrew the funds but was later arrested.
He was being
held in Brixton Prison while extradition proceedings were
taking place, and the habeas corpus claim dealt with whether the
alleged
conduct would have been prohibited under English law. The Court
considered the new 'obtaining a funds transfer by deception' offence.[52]
It had to examine whether the
conduct of Holmes involved the deception of another person, amongst
other things. Holmes argued that
his conduct did not involve the
deception of any person. He had entered the appropriate passwords; the
system had been given instructions
and had followed them as it was
programmed to do. His counsel argued that there was no sense in which
Holmes could be said to have
deceived his bank's computer system, and
no other relevant actor at CAAG was involved. It was suggested that
officers of ABN Amro
were deceived by the confirmation. The Court held
that the request for and the provision of the confirmation (caused by
Holmes) involved
a deception. Holmes used the computer system of CAAG
to deceive the officer of ABN Amro that read the confirmation Holmes
caused
to be sent. The officer, after receiving the confirmation,
finalised the payment (ie, removed its conditional status). Holmes'
counsel
argued that the request for and the confirmation given was
after the payment had taken place. However, consistent with existing
case-law,
the court held that payment was not complete until the
condition was removed and therefore the deception took place in the
course
of the payment transaction.[53]
A
slight variation?
The Holmes case is an example of the new offence
effectively proscribing what was clearly a fraudulent course of
conduct. However,
but for the request for and provision of a
confirmation, it appears that the legislation would not have prohibited
the conduct. This
may be more easily demonstrated by a hypothetical
example based on the Holmes' scenario with one important variation.
Suppose in
the Holmes case, after ABN Amro received the payment
instruction and underlying funds it simply credited Holmes' account (as
it was
probably quite entitled to do).[54]
The payment would have been
complete and Holmes would have had a present entitlement to the funds
from the time they were credited
to his account.[55]
In the author's view, in this
alternative scenario following the reasoning in the Holmes case, there
would not have been a breach
of section 15A. However, the conduct would
still have been clearly fraudulent. This, of course, assumes that the
court would again
find that the 'deception' of CAAG's computer system
was not a relevant deception for the purposes of section 15A. In one
sense, it
could be argued that the computer system was deceived in that
it was 'tricked' into following the instructions of a person who was
not authorised to give them. It is probably more accurate to say that
the instructions, while given without authority, were properly
given
for the purposes of the computer system and did not actually deceive in
any meaningful way that computer system.[56]
The
current provisions still do not work (and some possible solutions)
What
is not working
The core logic flowing through the English
provision still appears to be one of fraudulently obtaining property or
something similar
by deceiving another. While this is understandable
for historical reasons, it does not capture all forms of fraudulent
funds transfers.
The legislation needs to focus on the end result,
not the means. The crime is not so much the causing of a funds transfer
by deceiving
another, but the causing of changes in people's monetary
and economic rights without the right or entitlement to do so. It is a
fraudulent
acquisition of an increased monetary balance
vis-à-vis a financial intermediary which is the illegal end
achieved by this
behaviour.
The post-Preddy formulation (section 15A) is
clearly an improvement. It focuses on the transfer of funds rather than
of property.
However, it still focuses the court's attention on
deceiving a person.
In practice, the funds transfer system is largely
automated and computerised. Arguably these types of crime are something
better
characterised as computer-crime than conventional deceit.
Computer crimes, due to their unique characteristics, may need to be
dealt
with in separate legislation to conventional deceit and fraud
crimes. Furthermore, as Holmes showed, the act complained of may be
more one of dishonesty rather than deceit. It is the dishonest gaining
an increased balance (the end) rather than the deceit of the
players
involved that is crucial. Possible
solutions
Consideration should be given to reformulating the
offence to be one of dishonestly obtaining monetary rights. Three
possible approaches
are outlined below. The first two are revisions of
the existing offence. The third and most ambitious one is a
reformulation of the
offence.
The most straightforward approach would be to
amend the provision as follows: "(1)
A person is guilty of an offence if (delete: by any deception) he
dishonestly obtains a money transfer for himself or another."
Removing the concept of
'deception' would avoid the problem highlighted in the Holmes case of
the need to identify a person who has
been deceived to demonstrate the
offence has occurred. However, it may raise concerns in that it by
removing the 'deceit' pre-condition,
it leaves the scope of offence
provision too open-ended.[57]
A variation on this approach would be to add a
further subsection to the existing section 15A to the effect that (for
the avoidance
of doubt) the deception of any person, including a body
corporate, satisfies subsection (1). It would need to go on to state
that
a person may be deceived if a system or procedure that they have
established and control is deceived. This could be contained in
the
general crimes legislation or in stand-alone computer crimes
legislation.
For example, at the risk of some artificiality,
the provision could state that deception includes inducing a system,
procedure or
routine (including a computer system) to do any act or
omit to do any act in circumstances where the actor does not have the
authority
to do so. This is analogous to the NSW approach. In NSW, the
relevant provision is as follows: "(1)
Whosoever by any deception dishonestly obtains for himself or herself
or another person any money or valuable thing or any financial
advantage of any kind whatsoever shall be liable to imprisonment for 5
years.
(2) In subsection (1): deception means deception (whether deliberate or
reckless) by words or conduct as to fact or as to law, including:
(a) a deception as to the present intentions of the person using the
deception or of any other person, and
(b) an act or thing
done or omitted to be done with the intention of causing:
(i) a computer system, or
(ii) a machine that is designed
to operate by means of payment or identification,
to make a response that the person doing or omitting to do the act or
thing is not authorised to cause the computer system or machine
to make
..."[58]
A third approach would be to reformulate the existing provision to
focus instead on causing a money transfer (using the present definition
in section 15A(2)) without authority. Instead of deception, in the
author's view appropriate 'mental element' would be acting without
the
authority of the person whose balance is directly or indirectly reduced[59]
(or of any other person who has
the authority to cause such a reduction) by the funds transfer.
By way of illustration only, some tentative
drafting of a possible offence is set out below. The existing
subsection 15A(2) is repeated
below for convenience.
"(1) It is an offence if a person causes a money transfer in
circumstances where they do not have the authority of the holder of
the
account debited (as described in subsection (2)) to do so or of another
person who does have the authority to authorise the transfer.
(2) A money transfer occurs when-
(a) a debit
is made to one account,
(b) a credit is made to another,
and
(c) the credit results from the debit or the debit
results from the credit."
Clearly, the above
drafting would need further work and analysis. For example, definitions
of holder and account may be required.[60]
However, the suggested wording
shows that a 'wrongful funds transfer' offence can be designed by
reference to acting without proper
authority, rather than circumstances
involving deception.[61]
Summary
and conclusion
As the discussion above has shown, the conceptual
basis of modern payment facilities is the movement of wealth or buying
power by
the variation in people's balances with financial
intermediaries. Causing the movement in a person's balance with their
bank is the
traditional way in which a payment by funds transfer takes
place.
Cases such as Preddy and Holmes show the
difficultly in constructing a workable criminal offence provision to
address situations
of fraudulent electronic funds transfers. Section
15A, implemented following the Preddy decision, is a considerable
improvement on
the original position. However, as this article has
shown, in the author's view further refinement is needed. Three
possible approaches
to addressing the weakness in the current provision
have been discussed above, including some tentative drafting.
Hopefully, this
article may be a useful contribution to the debate and
assist the process of further refining this area of the law.
Notes
[1] R Goode, Commercial Law, 3rd
edition, Sweet and Maxwell, 2004, at p460.
[2] R v Preddy [1996] UKHL 13; [1996] AC 815.
[3] R (Holmes) v Brixton Prison Governor
[2004] EWHC 2020.
[4] Goode, Commercial Law, at 452.
[5] B Geva, 'The Concept of Payment
Mechanism' (1986) 24 Osgoode Hall LJ 1, at 4.
[6] For more information, see Tyree,
Banking Law in Australia, 4th edition, Butterworths, 2002, para 5.2; D
Kreltszheim "The legal nature
of 'electronic money': Part 1" (2003) 14
JBFLP 161, at 176; Geva, Bank Collections and Payment Transactions -
Comparative Study of legal Aspects, Oxford University Press, 2001, at
10-14; Bollen, "The Development and Legal Nature of Payment
Facilities", Murdoch University Electronic Journal of Law, Volume 11,
Number 2 (June 2004)
<http://www.murdoch.edu.au/elaw/issues/v11n2/bollen112.html>
,
paras 1 and 9
[7] ie: legal currency.
[8] eg: Section 36 of the Reserve Bank
Act 1959 (Australia). See also Tyree & Beatty, The Law of
Payment Systems, Butterworths, 2000, at 3; Bollen, "The Development and
Legal
Nature of Payment Facilities", para 49
[9] eg, customs and usage, prior
dealings or holding out
[10] Libyan Arab Foreign Bank v Bankers
Trust Co [1989] QB 728.
[11] Galvin "The legal nature of stored
value transactions" (1999) 10 JBFLP 54 at 54; Geva, Bank Collections
and Payment Transactions - Comparative Study of legal Aspects, at 13
[12] Bollen, "The Development and Legal
Nature of Payment Facilities", para 27.
[13] Bollen, "The Development and Legal
Nature of Payment Facilities", para 27.
[14] Financial intermediary here has a
broad meaning: essentially any person who is in the business of taking
deposits or otherwise taking
money and owing debts to clients and/or
lending money to clients.
[15] United Dominions Trust Ltd v
Kirkwood [1966] 2 QB 431 per Lord Denning at 446, see also judgement of
Diplock LJ; Foley v Hill [1848] EngR 837; (1848) 2 HL Cas 28, 9 ER 1002; approved in
Croton v R [1967] HCA 48; (1976) 117 CLR 326
[16] and paying those funds immediately
to the payee nominated by the payer. See Bollen ,"The Development and
Legal Nature of Payment
Facilities", para 94
[17] or in some cases owes less money
to the payee FI (ie when the payee is in overdraft and the receipt of
the payment reduces their
overdraft but does not eliminate it)
[18] or indeed owes money to the payer
FI
[19] Blay and Clark, Australian law of
Financial Institutions, at para 9.01; Tyree, Banking business in
Australia, at para 36.2; Bollen,
"The Development and Legal Nature of
Payment Facilities" above at para 94
[20] Geva, Bank Collections and Payment
Transactions, at 273; Geva, "Payment into a bank account" (1990) 5 JIBL
108, at 108
[21] ie, their amounts rather than the
debts themselves have moved.
[22] Geva, "The Concept of Payment
Mechanism", at 22; Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102; but see Delbruek
& Co v Manufacturers Hanover Trust Co [1979] USCA2 862; (1979) 609 F 2d 1047, at
1051
[23] Tyree, Banking business in
Australia, at para 36.2.
[24] The third party is usually either
a correspondent bank or a central bank (eg the Bank of England).
[25] Libyan Arab Foreign Bank v Bankers
Trust Co [1989] QB 728.
[26] ie, debts or choses in action
vis-à-vis their respective FIs.
[27] [2000] UKHL 29; [2001] 1 AC 102.
[28] at 128.
[29] Or almost the same, minus any
applicable fees etc. The payer's balance has been reduced by the same
or a similar amount as the payee's
balance has increased.
[30] ie movement of electrons,
electronic signals and radio waves etc only
[31] Geva, Bank Collections and Payment
Transactions at 270-280; Royal Products Ltd v Midland Bank Ltd [1981] 2
Lloyd's Reports 194
[32] Blay and Clark, Australian law of
Financial Institutions, at para 9.06; Bollen, "The Development and
Legal Nature of Payment Facilities",
at para 26
[33] It is the acceptance by the payee
of the payment tendered that makes the payment an effective discharge
of the existing debt.
[34] eg, effect a purchase or store
value
[35] For example, to effect a payment,
the payer could cause a third party to hold on trust valuable property,
such as a painting or precious
metals, for the benefit of the payee.
[36] R v Preddy [1996] UKHL 13; [1996] AC 815
[37] Per Goff LJ at 534
[38] A civil action, under the tort of
deceit, was presumably still an option. However, if the defendant had
disposed of the monies and
did not have significant assets, the civil
action may not be a particularly attractive option.
[39] [1996] UKHL 13; [1996] 3 WLR 255.
[40] [1996] UKHL 13; [1996] 3 WLR 255, at 265B.
[41] http://www.bailii.org/ew/other/EWLC/1996/243.html,
accessed 18 December 2004.
[42] Para 1.7.
[43] Part II of the Report, title.
[44] Paras 3.38 and 3.41
[45] Para 4.4.
[46] Para 5.2.
[47] Para 4.11.
[48] Section 15B(2)
[49] R (Holmes) v Brixton Prison
Governor [2004] EWHC 2020.
[50] The Society for Worldwide
Interbank Financial Telecommunications (SWIFT). See www.swift.com.
[51] Presumably ABN Amro requested the
confirmation due to the unusual circumstances (eg the large
international funds transfer to a private
citizen).
[52] Section 15A
[53] Momm v Barclays Bank [1977] QB
790.
[54] ie, without requesting a
confirmation
[55] Geva, Bank Collections and Payment
Transactions - Comparative Study of legal Aspects (2001) at 270; Momm v
Barclays Bank
[56] Arguably the owner or operator of
the computer system may have been deceived, but the courts do not seem
to have followed this approach.
The computer system was designed to
operate on the basis of certain passwords and it did so. The system
itself was not designed or
expected to test whether the person entering
the correct passwords and initiating transactions had the bank's
authority to do so.
[57] ie, that the offence may have an
undesirably wide scope, catching more conduct than intended
[58] Crimes Act 1900 (NSW), section
178BA
[59] Or whose negative balance
(overdraft) is increased
[60] This is to ensure it covered
securities clearing systems, stored value cards and other
non-conventional payment facilities.
[61] This also has the advantage of
being a technology-neutral approach, as it does not need to refer to
paper or computer-based systems,
and should be able to cater for new
systems developed in the future.
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