D. Defining Banking at Common Law

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 19-23

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In the end, to define the scope and content of the federal banking power, either by giving content to section 91(15) or by interpreting the Bank Act, the courts must state what they think banking is as a human activity where the Act is silent or ambiguous. There is no escape from the common law. Lord Watson’s statement in Tennant v. Union Bank of Canada⁵⁴that banking embraces "every transaction coming within the legitimate business of a banker" remains both the starting point for judicial attempts to define banking and a summary of what those attempts have achieved. Definition there must be to determine the outcome in

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legislation, but a definitive statement seems impossible, as Monnin J.A. conceded in Central Computer Services: "There is no exact definition of a banker or a bank."⁵⁵

Or, as Lord Denning M.R. earlier remarked: "Like many other beings, a banker is easier to recognise than to define."⁵⁶

To define banking at common law, the courts have consistently applied two general principles. First, they have taken a progressive approach to the meaning of "banking" in section 91(15) and by extension in the Bank Act. The meaning of banking is not frozen in 1867 but interpreted in light of the current Act.⁵⁷

Secondly, the common law has recognized the dynamic nature of banking as a commercial activity; as Salmon J. stated in Woods v. Martins Bank:⁵⁸"[T]he limits of a banker’s business cannot be laid down as a matter of law. The nature of such business must in each case be a matter of fact."⁵⁹

The approach of the common law to defining banking set out above⁶⁰by Lord Denning M.R. and Isaacs J. is reflected in Canadian law.⁶¹

While the standard English definition established in United Dominions Trust Ltd. v. Kirkwood⁶²emphasized account operation as the essential business of banking, instead Canadian attempts to capture the essential nature of banking preferred to emphasize dealing in credit.⁶³

The fullest discussions of banking at common law are found in Bergethaler⁶⁴and Canadian Pioneer Management.⁶⁵

In the former case, the Manitoba Court of Appeal decided that the essential characteristic of banking is the obligation of the banker to honour cheques, after drawing up lists of what bankers did in the mid-twentieth century, in order to determine which activity was the core activity. Even so, the court still conceded that other financial institutions also provided this service,⁶⁶making the task of defining banking murky. The predominance of electronic funds transfer today makes this definition even more problematical unless it is framed as an obligation to honour payment

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instructions. In the latter case, the Supreme Court of Canada concluded that the pursuit of a common law definition was futile once Parliament had spoken through the Bank Act but provided no assistance for those situations where the Act is silent or ambiguous.

In Canadian Pioneer Management, Beetz J. attempted to define the essential nature of banking by examining the nature of the bank and customer relationship; the economic and legal functions performed by banks within society; and the formal, or institutional, character of banks themselves. The extensive analysis required by this approach was...