Page images
PDF
EPUB

CHAP. XII worth mentioning from the point of view of the paying bank. The recent Gordon decisions dealt with the position of the collecting bank, and are reviewed in the next chapter. From one aspect of these cases it appears that in event of the collecting bank being liable to the true owner of cheques that have been deposited upon a forged indorsement, it may, nevertheless, as paying bank, escape liability by force of section 60, in the case of those cheques which are drawn upon itself; for in the case of those cheques it is also the paying banker. And, if the paying banker is to go scot free, that is incompatible with making him liable in another capacity. I must confess that to me the decision does not seem reasonable, and a distinction seems clear between the functions and consequent liabilities of the same bank when paying and when colCf. post, pp. lecting. What I have stated, however, appears to have been decided by the Court of Appeal, and may be useful to the large banks, who receive many cheques drawn on themselves.

194-197.

[merged small][ocr errors]

So far I have dealt only with the ordinary cases. It is the case, however, that sometimes one meets in practice unusual crossings which are not authorised by the Act. Of such a kind is a crossing "for the account of John Jones," or "account payee."

It may be asked whether the paying bank is bound to see that the right account has been credited by demanding of the bank presenting the cheque an indorsement to that effect. It does not appear that this course is necessary. Applying the reasoning which was used in Bellamy v. Marjoribanks and Smith v. Union Bank, it would seem that the drawer of the cheque has issued a legal document, a cheque, which can be negotiated and transferred from party to party indefinitely until no one can tell from what quarter it may be presented. Upon it is a crossing unknown to the law. If the crossing does not effectually prevent the negotiation or transfer

of the cheque, the paying bank ought not to be limited CHAP. XII. from paying it through ordinary business channelsexcept, of course, that the special crossing, which has statutory sanction, must be complied with.

175.

The better opinion seems to be that, if the courts of Crossing a/c. Payee, and law gave any effect to such a crossing, it would be to see ante 159, regard it as a memorandum directed to the bank with and post p. whom the cheque was deposited for collection, and calculated to put such bank on guard. In Queensland there is a section which does give such effect to these crossings. With regard to all irregular instruments in the nature of cheques or bills, it is worth remembering that if they are not contemplated by the Bills of Exchange Act there can be no statutory duty nor statutory protection in respect of them; and, with regard to fulfilment of the contract between bank and customer, the ordinary banking contract does not entitle the customer to draw, nor require the bank to pay, anything but usual and regular documents. If a customer persist in drawing instruments with unusual terms or conditions in them, the bank can refuse to comply with such conditions; of course, any answer should be carefully worded, so as not to injure credit; and if irregular or unusual orders drawn by a customer have been paid, and a course of dealing thereby established, it would be very unwise to act otherwise without first communicating with him. This applies equally to irregularities in crossings or in the body of the instrument.

To settle any point, in relation to the liability of a bank in respect of crossed cheques, which arises upon the meaning of the Bills of Exchange Act, there are two important rules which should be borne in mind.

They are:-(1) When an Act speaks of a banker, it ordinarily means a banker acting in his capacity as such in correlation with a customer; of course, transactions which are purely in respect of bank premises, or

CHAP. XII. purely between a banker and his staff or his branch offices, are not in this sense of the word dealings of a banker. (2) All the statutory provisions of the crossed cheques sections for the protection of the banker are designed to counteract some risk imposed on the banker for the benefit of customers by those sections. These two canons of construction are very much relied upon by Mr. Arthur Cohen, K.C., and Sir John Paget in lectures and opinions on banking. But the latter purports to think these canons somewhat at a discount since the decision in the Gordon cases. Though the second appears to have been expressly made use of in the Court of Appeal. The application of these rules can be made to appear more clearly in relation to the protection to the collecting banker.

As to the more general duties of the paying bank, see ante, Cap. XI., and the grounds for refusal of a cheque, p. 148.

CHAPTER XIII.

CROSSED CHEQUES-THE COLLECTING BANK.

We come now to a consideration of the 82nd section CHAP. XIII. of the Bills of Exchange Act. Of all the crossed cheques sections of the Act, this is the one which affords some measure of protection to the collecting bank.

In the first place, it will be well to point out what it is from which the bank requires protection. In what way is the collecting bank in any danger or need of protection, provided it does its work properly for its own customers who lodge cheques? The answer to that question is: The bank is liable to an action at law to recover the value of the cheques at the suit of their true owner, supposing them to have been deposited by one who was not the true owner. Usually, of course, the customer who deposits cheques is the true owner, but sometimes, by accident or by design, the customer who deposits cheques has a flaw in his title to them or no title at all, and the bank, in obtaining the proceeds and placing them at the disposal of such a depositor, is dealing with such cheques in a manner inconsistent with the rights of the true owner. This is an act of conversion on the part of the bank. The depositing of such cheques for his own credit is also conversion on the part of the depositor, but the true owner generally prefers to sue the bank. No doubt the depositor is more directly guilty than the bank, which is usually morally innocent and very much. in the position of an agent; the bank, however, is more than a mere agent; it does not carry the cheque to the

CHAP. XIII. paying bank and then carry the actual cash proceeds to its customer and hand them over as a servant would. What the bank does is to receive the proceeds (or credit for them) through its exchanges and to credit the customer in account, using the proceeds to swell its own funds, which it manages as it pleases. But it does not matter much from what point of view or in what language the conduct of the banking operation of collection is described, for it is now well-settled law that in such cases there may be conversion by the bank.

Chattel features of cheques.

The preceding paragraph must not be taken to convey that a bank cannot be a mere "agent for collection"; transactions are often carried out in such a way as to make the bank an agent for collection simply, in the sense in which that phrase is used to test rights under the Act. There is another anomaly which deserves explanation. A cheque is a chose in action, and it is anomalous that anyone can be guilty of conversion of a chose in action; but a cheque may be regarded as made up of two parts, a chattel part and a chose in action. The real value of the cheque is the chose in action—the right to receive payment of the sum of money for which it is drawn. If a person is sued for conversion of a cheque, it must be for the chattel part-the mere written instrument-but the law will not allow him to purge his conversion by handing back the spent document or proving that it is now valueless; the law will find him liable for damages for his act of conversion, and apply as the measure of damages the value received upon the cheque. All this is a little roundabout and curious, but it has become the law, and in the language of Lord Lindley in 1903, A.C. at p. 247, and cf. the Gordon cases, "a long series of well-established 1897, 1 Q.B. authorities, which cannot, I apprehend, be now questioned, establishes the liability of the bank beyond all dispute."

p. 156,

Lacave v.

Crédit
Lyonnais.

When such actions are brought against a bank, the

[ocr errors][ocr errors]
« EelmineJätka »