Contract Damages for Wrongful Dishonour of a Cheque

Date01 May 1997
Published date01 May 1997
Contract Damages for Wrongful Dishonour of a Cheque
Nelson Enonchong*
Suppose a bank wrongfully dishonours a customer’s cheque and the customer is
not a trader. If he sues the bank for breach of contract, but does not allege and
prove special damage, can the customer recover substantial damages for injury to
his credit? This question was dealt with by the Court of Appeal in Kpohraror v
Woolwich Building Society.
The facts are short and uncomplicated. The plaintiff
held a current bank account with the defendants, the Woolwich Building Society.
He had described himself as a self-employed ‘exporter/importer’ when he
converted his savings account with the defendants to a current account. He drew
a cheque for £4,550 on the account in favour of a wholesale supplier, Phils
(Wholesale) Ltd, who had agreed to supply him with goods for shipment to and
resale in Nigeria. When the cheque was presented for payment the defendants
wrongfully refused payment, giving an unfounded and discreditable reason for it
(‘cheque reported lost’). In his action for breach of the current account contract, the
plaintiff claimed general damages
for loss of business reputation and credit.
Liability was admitted, so the only dispute was about the assessment of damages.
The Master in Chambers awarded £5,550 with interest as general damages for the
injury to the plaintiff’s credit caused by the dishonour of the cheque and the
discreditable reason given for it. He rejected the defendants’ submission that the
damages should be nominal only. The Court of Appeal upheld that decision, but on
a different ground.
The ground on which the Master awarded substantial damages was that the
plaintiff was a trader, and there is an exception (the trader exception) to the
general principle of contract damages which allows a plaintiff who is a trader to
recover substantial damages without proof of special loss. But the ground on which
the Court of Appeal allowed the damages was that a person who is not a trader can
recover, without proof of special damage, substantial damages for injury to his
credit when his cheque is wrongfully dishonoured by the bank. This Court of
Appeal decision represents a radical departure from long-standing authorities and
makes Kpohraror a case of significant novelty. But the very novelty of the decision
raises the question whether it is well founded either in authority or in principle.
This comment seeks to argue that it is not.
The trader exception
It is a settled proposition that for the wrongful dishonour of his cheque a plaintiff
can maintain a claim against the bank for breach of contract and recover nominal
The Modern Law Review Limited 1997 (MLR 60:3, May). Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden, MA 02148, USA.412
*Faculty of Law, University of Leicester.
2 There was also a claim for special damages, particulars of which were supplied. But we may put that
claim to one side. It was disposed of by applying the general principle of remoteness laid down in
Hadley vBaxendale (1854) 9 Exch 1.

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