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Malaysian Banking Law – Definition of a Banker According to Dr HL Hart
General Overview
Another important legal definition of a banker was provided by Dr HL Hart. Dr Hart defined a banker or bank as:
“A person or company carrying on the business of receiving moneys, and collecting drafts, for customers subject to the obligation of honouring cheques drawn upon them from time to time by the customers to the extent of the amounts available on their current accounts.”
This definition focuses on the essential operational duties of a banker, particularly the acceptance of money, collection of payment instruments, and the obligation to honour customer cheques.
Essential Elements of Dr Hart’s Definition
1. A Person or Company
According to Dr Hart, a banker may be:
2. Carrying on the Business of Receiving Money
A banker receives money from customers through:
3. Collecting Drafts for Customers
Banks collect drafts and payment instruments on behalf of customers.
A draft generally refers to:
4. Obligation to Honour Cheques
A key feature in Dr Hart’s definition is the banker’s obligation to honour customer cheques.
This means:
5. Current Accounts
Dr Hart’s definition specifically refers to current accounts.
Current accounts allow:
Note Form – Dr Hart’s Definition of a Banker
A Banker May Be:
Essential Banking Functions
Important Legal Principle
A banker has a duty to honour customer cheques so long as sufficient funds are available in the account.
Relationship With Other Definitions
Similarities With
United Dominions Trust Ltd v Kirkwood
Dr Hart’s definition is similar to the principles discussed in United Dominions Trust Ltd v Kirkwood because both emphasise:
Similarities With
Halsbury’s Laws of England
Like Halsbury’s Laws of England, Dr Hart’s definition focuses on traditional banking functions involving deposits and cheque operations.
Difference From Broader Modern Approaches
Modern banking law sometimes adopts a broader approach by recognising digital payment systems and electronic transfers as substitutes for traditional cheque systems.
Therefore, modern banking may extend beyond the strict cheque-based model described in older legal definitions.
Application in a Case Scenario
Scenario
SecureBank Sdn Bhd accepts deposits into customer current accounts. Customers may issue cheques, deposit payment drafts, and transfer money through banking facilities. The bank regularly collects cheques for customers and honours cheque payments where sufficient funds exist.
Under Dr Hart’s definition, SecureBank clearly qualifies as a banker because it:
Critical Analysis
Dr Hart’s definition reflects the traditional understanding of banking during a period when cheques and negotiable instruments played a central role in commerce.
However, modern banking systems increasingly rely on:
Another issue is that many modern financial technology companies perform payment and deposit functions similar to banks without maintaining traditional cheque systems.
Therefore, while Dr Hart’s definition remains legally influential, courts and regulators may need to adopt more flexible interpretations to address modern banking practices.
Unresolved Issues
Decline of Cheques
Many modern banking systems rarely use cheques, raising uncertainty regarding whether cheque-related functions remain essential.
Digital Financial Platforms
FinTech companies may perform banking-like activities without satisfying traditional banking definitions based on cheques and current accounts.
Modernisation of Banking Law
Traditional legal definitions may not fully reflect the realities of digital banking and electronic payment systems.
Conclusion
According to Dr HL Hart, a banker is a person or company engaged in receiving money, collecting drafts, and honouring customer cheques from current accounts. This definition highlights the traditional core functions of banking, especially the operation of current accounts and cheque payment systems. Although modern banking has evolved significantly through digital technology and electronic payments, Dr Hart’s definition continues to provide an important foundation for understanding the legal characteristics of banking business in Malaysian banking law.
General Overview
Another important legal definition of a banker was provided by Dr HL Hart. Dr Hart defined a banker or bank as:
“A person or company carrying on the business of receiving moneys, and collecting drafts, for customers subject to the obligation of honouring cheques drawn upon them from time to time by the customers to the extent of the amounts available on their current accounts.”
This definition focuses on the essential operational duties of a banker, particularly the acceptance of money, collection of payment instruments, and the obligation to honour customer cheques.
Essential Elements of Dr Hart’s Definition
1. A Person or Company
According to Dr Hart, a banker may be:
- An individual person, or
- A company or corporation.
2. Carrying on the Business of Receiving Money
A banker receives money from customers through:
- Current accounts,
- Deposit accounts,
- Savings accounts,
- Other banking arrangements.
3. Collecting Drafts for Customers
Banks collect drafts and payment instruments on behalf of customers.
A draft generally refers to:
- Cheques,
- Bills of exchange,
- Payment orders,
- Other negotiable instruments.
4. Obligation to Honour Cheques
A key feature in Dr Hart’s definition is the banker’s obligation to honour customer cheques.
This means:
- The bank must pay cheques issued by customers,
- Provided sufficient funds are available in the customer’s current account.
5. Current Accounts
Dr Hart’s definition specifically refers to current accounts.
Current accounts allow:
- Continuous deposits,
- Frequent withdrawals,
- Payment transactions,
- Commercial banking activities.
Note Form – Dr Hart’s Definition of a Banker
A Banker May Be:
- An individual person.
- A company or corporation.
Essential Banking Functions
- Receiving money from customers.
- Collecting drafts and payment instruments.
- Maintaining current accounts.
- Honouring customer cheques.
- Facilitating commercial transactions.
Important Legal Principle
A banker has a duty to honour customer cheques so long as sufficient funds are available in the account.
Relationship With Other Definitions
Similarities With
United Dominions Trust Ltd v Kirkwood
Dr Hart’s definition is similar to the principles discussed in United Dominions Trust Ltd v Kirkwood because both emphasise:
- Current accounts,
- Payment of cheques,
- Collection of cheques or drafts,
- Banking as a regular business activity.
Similarities With
Halsbury’s Laws of England
Like Halsbury’s Laws of England, Dr Hart’s definition focuses on traditional banking functions involving deposits and cheque operations.
Difference From Broader Modern Approaches
Modern banking law sometimes adopts a broader approach by recognising digital payment systems and electronic transfers as substitutes for traditional cheque systems.
Therefore, modern banking may extend beyond the strict cheque-based model described in older legal definitions.
Application in a Case Scenario
Scenario
SecureBank Sdn Bhd accepts deposits into customer current accounts. Customers may issue cheques, deposit payment drafts, and transfer money through banking facilities. The bank regularly collects cheques for customers and honours cheque payments where sufficient funds exist.
Under Dr Hart’s definition, SecureBank clearly qualifies as a banker because it:
- Receives customer money,
- Maintains current accounts,
- Collects drafts,
- Honours customer cheques.
Critical Analysis
Dr Hart’s definition reflects the traditional understanding of banking during a period when cheques and negotiable instruments played a central role in commerce.
However, modern banking systems increasingly rely on:
- Electronic transfers,
- Internet banking,
- Mobile payments,
- Digital wallets,
- Instant payment systems.
Another issue is that many modern financial technology companies perform payment and deposit functions similar to banks without maintaining traditional cheque systems.
Therefore, while Dr Hart’s definition remains legally influential, courts and regulators may need to adopt more flexible interpretations to address modern banking practices.
Unresolved Issues
Decline of Cheques
Many modern banking systems rarely use cheques, raising uncertainty regarding whether cheque-related functions remain essential.
Digital Financial Platforms
FinTech companies may perform banking-like activities without satisfying traditional banking definitions based on cheques and current accounts.
Modernisation of Banking Law
Traditional legal definitions may not fully reflect the realities of digital banking and electronic payment systems.
Conclusion
According to Dr HL Hart, a banker is a person or company engaged in receiving money, collecting drafts, and honouring customer cheques from current accounts. This definition highlights the traditional core functions of banking, especially the operation of current accounts and cheque payment systems. Although modern banking has evolved significantly through digital technology and electronic payments, Dr Hart’s definition continues to provide an important foundation for understanding the legal characteristics of banking business in Malaysian banking law.
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