Facts of the case
- C instructs his banker to purchase certain debentures on his behalf.
- The banker is further instructed to hold the debentures for C and collect interest on them.
- Later, C’s current account becomes overdrawn.
Issues in the case
- Whether the banker can exercise a lien over the debentures to recover the overdraft amount.
- Whether the bank’s possession of the debentures gives rise to a general lien despite the specific instructions.
Principles associated with the case
- A bank has a general lien over securities and goods of the customer in its possession unless they are held for a specific purpose.
- When a customer deposits securities or assets with specific instructions, the bank acts as an agent or trustee, not as a creditor.
- The doctrine of general lien does not apply where the property is held in a fiduciary capacity.
- Debentures held for safekeeping and interest collection are considered held for a specific purpose, not for securing any general debt.
Judgement
- The banker cannot exercise a lien over the debentures.
- Since the debentures were held for a specific purpose (to hold and collect interest), the banker acts in a fiduciary role.
- The banker has no right to use the debentures to settle C’s overdraft.
- The lien is excluded by the nature of the trust imposed by the instructions given by C.