145.

stance, a document which is not a cheque on the bankers CHAP. XI. (nor a regular bill or promissory note domiciled at the bank) is presented-such, for instance, as the cheque Ante, pp. 140, form already referred to-the bank would refer at once to the terms of the contract, express or implied from custom, or from an established course of dealing with that customer, and pay the document or not, according to whether it thereby fulfilled its side of the contract, together with the instructions, if any, on the face of the instrument. There must be regularity both on the face of the cheque and in the indorsements.

nisheed.

Sometimes it may happen that a creditor of a cus- A/c gartomer is driven to enforce a judgment debt against him by attaching his banking account. In this case a garnishee order is served upon the bank; after receipt of such an order, it will be the safer course to refuse any cheques drawn on the account attached, even though the balance of account at the customers' credit is larger than the amount of the judgment debt mentioned in the order.

Bank N.S. W.

A bank credit balance, being a chose in action, is A/c assigned. unassignable at common law. Yet such an assignment, when made bona fide and for valuable consideration, Newman v. would be protected by a Court of Equity and in Sydney, 12.C.R. 289 when an assignment was so made, and the bank notified, and it refused cheques drawn by the customer, on the ground that the balance had been assigned, it was held the bank was justified in so doing, as the Equity Court would have protected the assignment by an injunction if

necessary.

drawer.

Two recent cases-Healey v. Bank of New South No funds of Wales, in Victoria, and of Zeeb v. Bank of New South Wales, in Sydney-seem to show the development of a further and new ground in our legal system. In these cases the bank was satisfied that its customer-the plaintiff in each case-was a convicted criminal, and that the balance at customer's credit was the fruit of the crime, or part of it, and had handed back or undertaken to hand

CHAP. XI. to the party defrauded (being the Government of the State of New South Wales) a sum equal to the credit balance; it was held the bank was entitled to show this to be the case, and thus justify the dishonour of cheques subsequently drawn, and the criminal was not allowed to recover either damages or the amount of his former credit balance. This may, however, be simply a matter of public policy, and is more fully discussed, ante, pp. 91-96.

No funds available.

No right to draw cheque.

Payment.

Answer on dishonour.

Sometimes a customer makes and a bank receives a deposit or collects moneys for a special purpose, and, when this is done, the bank, of course, has a duty to carry out the special contract thus made. This puts upon the bank the duty of protecting the special fund, and, if necessary of dishonouring an ordinary cheque rather than entrenching upon it. I need hardly say that it would often, in such a case, be wiser to communicate first, if possible, with the drawer.

If a man's only right against a bank is to receive a remittance which the bank has undertaken to transmit, he is not, without prior arrangement, entitled to draw by cheque as against a current account in the ordinary way. And the same applies to one whose sole relationship is that of a fixed depositor.

If a cheque is not to be refused on any of the foregoing grounds, and is drawn on the right branch, it will be paid as a matter of course, if the credit of the drawer is sufficient; and, in this sense, credit includes the right of the drawer to have his cheques paid and charged against an overdrawn account, if the bank has conceded such a right, and the cheque is within the limits of the agreement as to credit.

Where a cheque has to be dishonoured, "Refer to Drawer" is a safer and more proper answer than "N.S.F." or "N.P.F." or any phrase indicating insufficient funds. Sometimes special circumstances enable

a bank to give a less ambiguous answer than "Refer to CHAP. XI. Drawer," and to some extent save the drawer's credit.

ment.

It is right for a banker to pay everything in the Order of payorder in which it is presented. But bills lying in the same bank under discount to it would quite properly be paid first.

If a cheque and bill be presented together, and the customer's account be insufficient for both, the bank may give preference to either.

If the aggregate amount of bills and cheques presented in a batch exceed the amount available, the banker may pay as far as the customer's credit will extend; and must not dishonour the whole because the credit is not sufficient to meet the aggregate sum.

CHAP. XII.

CHAPTER XII.

CROSSED CHEQUES-THE PAYING BANK.

The fact has been pointed out that mercantile custom and the regular usages of business men are sources of the mercantile law-that when a custom has become general, and is reasonable and of utility, it becomes an understood thing that that custom shall govern the transactions within its scope. It is, as it were, an implied term in the dealings of business men, to which the custom relates, that such dealings shall be taken to be subject to conditions which the custom embodies. Until a custom has been decided to be good and of full legal effect, it is difficult to put one's finger on the precise point where, in the history of a particular class of business, a practice, or an implied condition operating between a few men, became so general that every contract within its scope must be understood and interpreted in the light of the custom. Generally the validity of the custom is brought to a test by a case at law. Some litigant claims the benefit of it, evidence is called, and the custom is either proved or disproved, being tested by its universality and reasonableness. It is, of course, very difficult to prove a custom-as it should be.

The law as to crossed cheques, however, is a good illustration of law derived from mercantile custom. Only in this case the law courts were somewhat slow to recognise the custom to its full extent, and their decisions had to be supplemented and varied by Acts of Parliament.

To understand the law with regard to crossed cheques, it is necessary to understand the general effect

of these decisions and of the Bills of Exchange Act so CHAP. XII. far as it relates to cheques, and particularly of seven sections of the Act which deal specially with crossed cheques.

Two of the early decisions with regard to this class of cheques are inextricably mixed up with the history of the subject, and the most natural way to explain the matter is by following the course of events. These decisions, too, though amendments of the law have since been made, are still useful as precedents and as examples of the application of legal principles to the ascertainment of rights in respect of cheques.

I will turn now to the case of Bellamy v. Marjori- 7 Exc, 389. banks, date 1852. In this case the judgment of the Court of the Exchequer was delivered by Baron Parke, who in the course of his judgment said:-"Payment by cheques has now almost entirely superseded all other modes of payment in large, and is in very general use in smaller money transactions; and the practice of crossing them with the names of the bankers (the effect of which is the question in the present case) is also in very general use, and occurs in very many instances every day, not only in London, but in several other parts of the kingdom. It therefore seems to us to be of great importance that the effect of this crossing should be rightly understood.

"It was agreed on all hands that the practice of crossing cheques originated at the Clearing-house, the clerks of the different bankers who did business there having been accustomed to write across the cheques the names of their employers, so as to enable the Clearinghouse clerks to make up their accounts. It is quite clear that this had nothing whatever to do with the restriction of negotiability; for, at the time when this was done, the cheques were in the course of payment or presentation for payment, and all their negotiability was at an end.