United Dominions Trust Ltd v Kirkwood

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- United Dominions Trust Ltd v Kirkwood is a Court of Appeal case from 1966 (United Dominions Trust Ltd v Kirkwood, [1966] 2 QB 431) about what counts as “banking business” in English law. Judges: Lord Denning MR, Diplock LJ, Harman LJ.
- The facts: United Dominions Trust (a finance company) lent money to a dealer. The dealer said the loan contract was unlawful because UDT wasn’t registered under the Moneylenders Act 1900. UDT argued it was exempt as “banking business.”
- The court looked at older authorities, including an Australian decision (Permewan) and British cases, to define banking.
- Lord Denning’s test: A bank usually does three things—(1) takes money from customers and collects cheques, crediting customers’ accounts; (2) honors cheques and debits customers’ accounts; (3) keeps current or running accounts for customers. He also said a firm could still be a bank if other bankers recognize it as such, even if it doesn’t perform all three activities. Reputation among commercial men matters.
- Harman LJ dissented: He said the key feature of a bank is the maintenance of current or deposit accounts where withdrawal may require notice; cheque collection is an additional, not essential, feature. So UDT would not be a banker.
- Diplock LJ’s view: The essential common element is that a banker accepts deposits on a running account, repayable on demand or with notice. This aligns with Denning’s thinking about what makes a bank.
- The court’s conclusion: While accepting deposits is a necessary part of banking, it is not by itself enough. A true bank must operate current accounts that customers can use with cheques and other payments.
- So, the question wasn’t simply whether UDT did some banking-type activities; it boiled down to whether it opened and ran current accounts usable for cheque payments.
- Significance: This decision was an important early definition of banking, but it has been largely superseded by the Banking Act 1979 and the Financial Services and Markets Act 2000 for regulatory purposes. It remains relevant for deciding who is a banker for common-law rights and duties.