CHAPTER LII. CROSSED CHEQUES. Sub-sec. 7 of sec. 169 has no corresponding provision in the English Act. In other respects secs. 168 to 175, relating to crossed cheques, are copied from the English Act with the exception of the substitution in the Canadian Act of the word "bank" throughout for the word "banker," and of "bank" in clause (a) of sub-sec. 1 of sec. 168 for "and company or any abbreviation thereof," and the verbal alterations consequential on these changes. Although the provisions of the English Act have been adopted in the Canadian Act, the practice of using crossed cheques which is well known and frequent in England has never become usual and is in fact little understood in Canada. The history of the English legislation in regard to crossed History of cheques and the meaning of the provisions of the present Act English legislation. are discussed by Z. A. Lash, K.C., in an article in 6 Journal C. B.A. (1899) 166. Long before any legislation on the subject the custom existed in England of crossing cheques either with the name of a particular bank or simply with the words "& Co.," the popular impression being that such crossing restrained the negotiability of the cheque and made it payable, in the one case to the bank named, in the other only to some bank. It was held however in Bellamy v. Majoribanks, 1852, 4 Ex. 389, (where the origin of the custom is explained), that such was not the effect of the crossing, but that the object and effect of crossing was merely to oblige the holder to present it for payment through a banker. A statute of 1857, (19 & 20 Vict., c. 25), declared that a crossed draft should be "payable only to or through some banker." But in Simmonds v. Taylor, 1858, 4 C.B.N.S. 463, it was held (1) that the statute applied only where, at the time of the presentment for payment the cheque bore the crossing on its face, and not to a case where the crossing had been obliterated by a thief so completely as to make the crossing invisible except on very minute inspection; Sec. 168 History of English legislation. Definition. (2) that the crossing might be put on by one holder and taken off by another; (3) that the crossing was not part of the cheque itself, and therefore that an alteration in it would not avoid the instrument. In consequence of this decision the statute 21 & 22 Vict., c. 79 was passed in 1858. This statute (1) made the crossing a material part of the cheque, (2) made the obliteration of a crossing forgery, (3) exempted a banker from liability for paying a cheque when the crossing or alteration did not plainly appear, "unless such banker shall have acted malâ fide or been guilty of negli gence in so paying such cheque." The statute also authorized a holder to cross a cheque which had been issued uncrossed or to cross it with the name of a banker where it had been crossed simply "& Co.," and provided that where a cheque was crossed with the name of a banker, the drawee bank should not pay the cheque to any other than the banker with whose name it was crossed. Notwithstanding the last mentioned provision, it was held in Smith v. Union Bank, 1875, 1 Q.B.D. 31, 4 R.C. 436, that where the holder of a cheque had rendered it negotiable by endorsing it in blank, it was not rendered non-negotiable by the fact that he had also crossed it with the name of his own bank, and that, if the cheque was stolen, his bank was not liable to him in damages for paying the cheque when it was presented through another bank by a bona fide holder for value to whom the cheque had been transferred by the thief. Each of these decisions was a great surprise to the merchants, and at their instance "The Crossed Cheques Act, 1876" was passed. That Act introduced the "not negotiable" crossing, and gave a remedy to the true owner of a crossed cheque if it should be paid contrary to the crossing. It has been embodied, with some slight modifications indicated below, in the Bills of ExChange Act (secs. 168 to 175). Crossed Cheques. 168. Where a cheque bears across its face an addition of,— (a) the word 'bank' between two parallel transverse lines, either with or without the words 'not negotiable'; or, (b) two parallel transverse lines simply, either with or with- Sec. 168. out the words 'not negotiable'; such addition constitutes a crossing, and the cheque is crossed General. generally. 2. Where a cheque bears across its face an addition of the Special. name of a bank, either with or without the words 'not negotiable,' that addition constitutes a crossing, and the cheque is crossed specially and to that bank. 53 V., c. 33, s. 75. Eng. s. 76. A cheque may be crossed in six ways: (1) with two parallel Various transverse lines, (2) with the word "bank" between two parallel ways of crossing transverse lines, (3) with the name of a particular bank, or in cheques. any of these three forms with the added words "not negotiable. When a cheque bears across its face an addition of the name of a particular bank, with or without the words "not negotiable," and either between two parallel transverse lines or not, it is crossed specially and to the bank named. In the other cases mentioned, the crossing is general. The effect of adding the words "not negotiable" is that the person taking it does not acquire and cannot give a better title to the cheque than that which the person from whom he took it had (sec. 174). The crossing in any of the six ways may be made by the By whom drawer. If the cheque is issued uncrossed, the holder may cross crossing may be made it in any of the six ways. If it is crossed generally, the holder and how it may cross it specially. If it does not bear the words "not negoti- may be allowed. able," the holder may add them. If it is once crossed specially, the crossing cannot be altered otherwise than by the addition of the words "not negotiable," except in two cases: (1) the bank to which it is crossed may again cross it specially to another bank for collection; (2) a crossed cheque may be re-opened or uncrossed by the drawer writing between the transverse lines the words "Pay cash," and initialling the same. See sec. 169. The crossing is a material part of the cheque and may not be obliterated, or, except as above mentioned, added to or altered by any person (sec. 170). Payment of crossed Where a cheque is crossed specially to more than one bank, cheque except when crossed to another bank as agent for collection by the (sec. 169), the drawee bank must refuse payment (sec. 171). bank. drawee Sec. 168. By drawer. By holder. Varying. Words may added. By bank for collection. Subject to the proviso of sec. 172 and to sec. 173, the drawee bank is liable to the true owner of the cheque for any loss he sustains by the payment of the cheque in three cases: (1) if the drawee bank pays a cheque crossed specially as in the last paragraph mentioned, (2) or pays any other specially crossed cheque otherwise than to the bank to which it is crossed, or a bank acting as the agent for collection of such last mentioned bank (3) or pays a generally crossed cheque otherwise than to some bank (sec. 172). As to the liability of a bank which receives for a customer payment of a crossed cheque, where the customer has no title or a defective title, see sec. 175. 169. A cheque may be crossed generally or specially by the drawer. 2. Where a cheque is uncrossed, the holder may cross it generally or specially. 3. Where a cheque is crossed generally, the holder may cross it specially. 4. Where a cheque is crossed generally or specially, the holder may add the words Not negotiable. 5. Where a cheque is crossed specially the bank to which it is crossed may again cross it specially to another bank for collection. Changing 6. Where an uncrossed cheque, or a cheque crossed generally, crossing. is sent to a bank for collection, it may cross it specially to itself. Uncrossing. 7. A crossed cheque may be re-opened or uncrossed by the drawer writing between the transverse lines, the words Pay cash, and initialling the same. 53 V., c. 33, s. 76. Eng. s. 77. See notes to sec. 168. Sub-sec. 7 is not in the English Bills of Exchange Act. Chalmers (p. 259) says: "The drawer of a cheque sometimes strikes out a crossing at the request of the payee, and writes 'Pay cash' on it. The Act does not sanction this practice; but it is difficult to see who in such case could have any effective remedy." A crossing may not be obliterated or, except as authorized by this section, added to or altered, by any person (sec. 170). The English Act of 1876 (see notes supra) in terms only authorized the "lawful holder" to cross a cheque. The words "to another bank [banker] for collection" have been substituted for the words "to another banker, his agent for collection." Sub-sec. 6 was not in the Act of 1876. Sec. 169. 170. A crossing authorized by this Act is a material part Materially. of the cheque. 2. It shall not be lawful for any person to obliterate or, ex- Altering crossing cept as authorized by this Act, to add to or alter the crossing. 53 V., c. 33, s. 77. Eng. s. 78. This section reproduces the effect of sec. 6 of the English Act of 1876 (see notes, supra). The various forms of crossing are provided for by sec. 168. As to when a crossing may be added to or altered, see sec. 169. 145. As to an obliteration which is not apparent, see sec. 172. more than one bank. 171. Where a cheque is crossed specially to more than one Crossed to bank, except when crossed to another bank as agent for callection, the bank on which it is drawn shall refuse payment thereof. 53 V., c. 33, s. 78. Eng. s. 79. This section reproduces the effect of sec. 8 of the English Act of 1876 (see notes, supra). Where a cheque is crossed specially the bank to which it is crossed may again cross it specially to another bank for collection (sec. 169). As to the liability of a bank which pays a cheque in contravention of this section, see sec. 172. As there is no privity between the holder and the drawee of a cheque, a bank incurs no liability to the holder by refusing to pay. The only liability of the bank is to its customer, the drawer. |