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payable to bearer, and crossed to the London and County Bank, was stolen. It got into the hands of a holder in due course, who obtained payment through the London and Westminster Bank, notwithstanding the crossing. The Court held that the true owner had no remedy against the paying bankers, because the negotiability of the cheque was not affected by the crossing. To meet this difficulty, the Crossed Cheques Act, 1876 (39 & 40 Vict. c. 81), was passed. That enactment introduced the “not negotiable” crossing, and gave a remedy to the true owner of a crossed cheque if it was paid contrary to the crossing (see now sects. 79 (2) and 81). It also repealed the previous statutes. The present Act repeals the Act of 1876, and, by sects. 76–82, reproduced its provisions with some slight modifications.
By sect. 95, the provisions of the Act as to crossed cheques apply to dividend warrants; and by 46 & 47 Vict. c. 55, s. 17, post, p. 347, they are further applied to “any document issued by a customer of any banker, and intended to enable any person to obtain payment from such banker of the sum mentioned in such document."
Where a cheque was drawn payable to C.'s order, and was crossed with the words “ account of C., National Bank, Dublin," it was held that it was not thereby rendered nontransferable.
drawer or after issue.
77. (1) A cheque may be crossed generally or Crossing by specially by the drawer.
This is new, but declaratory. Sect. 4 of the Act of 1876 in terms only authorized the “ lawful holder" to cross a cheque. See now " holder" defined by sect. 2, ante, p. 5.
(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.”
1 Smith v. Union Bank (1875), 1 Q. B. D. 31, C. A.
(5) Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another banker for collection.
The words “ to another banker for collection” have been substituted for the words “ to another banker, his agent for collection."
Crossing a material part of cheque.
(6) Where an uncrossed cheque, or a cheque crossed generally is sent to a banker for collection, he may cross it specially to himself. This is new.
It may protect the banker from possible frauds by his clerks.
78. A crossing authorized by this Act is a material part of the cheque; it shall not be lawful for any person to obliterate, or, except as authorized by this Act, to add to or alter the crossing.
As to the effect of material alterations generally, see sect. 64, ante, p. 213. If a crossing is fraudulently altered or obliterated it is a forgery: see 24 & 25 Vict. c. 98, ss. 25 and 39.
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. In an unreported case it was held that where the indorser of a cheque crossed it, and at the request of the indorsee altered the crossing, the indorser could not set up that the cheque was avoided by the alteration. See also note to sect. 76.
Duties of banker as to crossed cheque.
79. (1) Where a cheque is crossed specially to more than one banker, except when crossed to an agent for collection being a banker, the banker on whom it is drawn shall refuse payment thereof.
(2) Where the banker on whom a cheque is drawn which is so crossed nevertheless pays the
same, or pays a cheque crossed generally otherwise than to a banker, or if crossed specially otherwise than to the banker to whom it is crossed, or his agent for collection being a banker, he is liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid.
Provided that where a cheque is presented for payment which does not at the time of presentment appear to be crossed, or to have had a crossing which has been obliterated, or to have been added to or altered otherwise than as authorized by this Act, the banker paying the cheque in good faith and without negligence shall not be responsible or incur any liability, nor shall the payment be questioned by reason of the cheque having been crossed, or of the crossing having been obliterated or having been added to or altered otherwise than as authorized by this Act, and of payment having been made otherwise than to a banker or to the banker to whom the cheque is or was crossed, or to his agent for collection being a banker as the case may be.
This section reproduces ss. 8, 10, and 11 of the Act of 1876. As there is no privity between the holder and drawee of a cheque, a banker incurs no liability to the holder by refusing to pay a crossed cheque. His only liability is to his customer, the drawer.
In a case before the Act of 1876 a crossed cheque payable to order was stolen from the payee. His indorsement was forged, and the cheque was paid in contravention of the crossing to a person who gave value in good faith. The drawer gave the payee another cheque. On these facts it was held (1) that the banker had no right to debit the drawer's account with the cheque, (2) that the payee who lost the cheque might have recovered the amount from the
person who received the money for it, but (3) that the drawer, having allowed his account to be debited with the cheque, might himself recover the amount from the person who got the cash for it. The Act does not appear to affect this decision, but it gives an additional remedy against the bankers to the true owner, who, in the case referred to, would have been the payee. If the cheque had been payable to bearer, or had been indorsed in blank by the payee before it was stolen, there would be no remedy apart from this section.?
Protection to 80. Where the banker, on whom a crossed banker and drawer where cheque is drawn, in good faith and without neglicheque is crossed. gence pays it, if crossed generally, to a banker,
and if crossed specially, to the banker to whom it is crossed, or his agent for collection being a banker, the banker paying the cheque, and, if the cheque has come into the hands of the
the drawer, shall respectively be entitled to the same rights and be placed in the same position as if payment of the cheque had been made to the true owner thereof.
This reproduces sect. 9 of the Act of 1876. If the cheque were payable to order, and the indorsement has been forged, the drawer or, as the case may be, the payee can recover the amount from the person who received payment of the cheque, if he can find him.3
81. Where a person takes a crossed cheque negotiable”
which bears on it the words “not negotiable,” he crossing on
shall not have and shall not be capable of giving a better title to the cheque than that which the person from whom he took it had.
Effect of “not
1 Bobbett v. Pinkett (1876), 1 Ex. D. 368, at p. 372.
2 Smith v. Union Bank (1875), 1 Q. B. D. 31, C. A., unless the cheque was crossed “not negotiable.'
3 Ogden v. Benas (1874), L. R. 9 C. P. 513 ; cf. Patent Safety Gun Cotton Co. V. Wilson (1880), 42 L. J. C. P. 713, C. A.
This reproduces the first part of sect. 12 of the Act of 1876. A cheque crossed “not negotiable” is still transferable, but its negotiable quality is limited. It is put on much the same footing as an overdue bill. A holder who has a good title can still transfer it, and the transferee is entitled to receive payment; but where the title of the transferor is defective a subsequent holder for value is deprived of the protection ordinarily afforded to a holder in due course. Suppose a cheque payable to bearer and crossed “not negotiable" is stolen. The thief gets a tradesman to cash it for him, and the tradesman gets the cheque paid on presentment through a banker. The banker who pays and the banker who receives the money for the tradesman are protected, but the tradesman would be liable to refund the money to the true owner, and, assuming payment of the cheque to have been stopped, he could not sue the drawer. So, too, where a cheque crossed “not negotiable” was drawn in favour of a firm, and one of the partners in fraud of his co-partner indorsed the cheque to the defendant, who cashed it, it was held that the other partner who, under the terms of the partnership agreement, was entitled to the cheque could recover the amount from the defendant.1
82. Where a banker in good faith and without Protection to
collecting negligence receives payment for a customer of a banker. cheque crossed generally or specially to himself, and the customer has no title or a defective title thereto, the banker shall not incur any liability to the true owner of the cheque by reason only of having received such payment.
1. A thief steals a crossed cheque payable to order, and inserts his own name in the place of the indorsee's. He then takes it to a Paris bank to collect for him, and they collect it through their London agents. The indorsee can recover the amount from the Paris bank.
| Fisher v. Roberts (1890), Times L. R. p. 354, C. A. See the section incidentally discussed in National Bank v. Silke (1891), 1 Q. B. 435, C. A. ? Kleinwort v. Comptoir d' Escompte (1894), 2 Q. B. 157.