Problems Of The Collecting Bank
| Date | 01 January 1960 |
| Author | Gordon Borrie |
| DOI | http://doi.org/10.1111/j.1468-2230.1960.tb00571.x |
| Published date | 01 January 1960 |
PROBLEMS
OF
THE
COLLECTING
BANK
IN
the course of his judgment in
Lloyds
Bunk,
Ltd.
v.
Savory
Co.,’
Lord Wright said that a banker can safely assume that most
cheques which he receives for collection are honestly come by.
It
is unlikely that any judge could give unqualified support to that
dictum today, because the statutory protection given to collecting
banks by section
4
of the Cheques Act,
1957,’
only applies
if
the
bank
is
able to show
it
has acted without negligence, and, as the
law stands at present, a collecting bank is rarely safe in assuming
that
‘‘
third party
”
cheques are honestly come by. When a bank is
asked by a customer to collect a cheque in which the payee is a third
party, the bank is normally put
on
inquiry.
If
it
turns out that
the bank’s customer has
no
right to the cheque because, for
example, his title rests
on
a forged indorsement, the bank will be
liable in conversion to the true owner for the value of the cheque,
unless
it
can show
it
made sufficient inquiry, including perhaps,
inquiry of the payee.
Section
4
(1)
of the Cheques Act,
1957,
reads:
“
Where a banker, in good faith and without negligence,-
(a)
receives payment
for
a customer of an instrument to which
this section applies;
or
(b)
having credited a customer’s account with the amount
of
such an instrument, receives payment thereof for himself;
and the customer has
no
title,
or
a defective title, to the
instrument, the banker does not incur any liability to the true
owner of the instrument by reason only
of
having received
payment thereof.”
Subsection
(2)
applies this provision to cheques, bankers’ drafts,
conditional orders drawn
on
banks, and documents drawn by a
public official intended to enable a person to obtain payment from
the Paymaster-General
or
the Queen’s and Lord Treasurer’s
Remembrancer.
This article is concerned principally with the application
of
section
4
to cheques; and with regard to cheques, the section replaces
section
82
of the Bills of Exchange Act,
1882,=
as amended by the
1
[1933]
A.C.
201, 239.
2
5
&
6
Eliz. 2,
c.
36.
3
45
&
46
Vict. c. 61.
If
the drawer’s signature is forged,
a
cheque is a nullity,
and it would seem clear, therefore, that a collecting bank could
nut
claim
the statutory protection
of
8.
4.
There itre also dicta to the effect that
a
fraudulent alteration of the amount of a cheque would render the cheque
not
a cheque for the purposes of
8.
4, and deprive the bank
of
its protection
irrespective
of
negligence: Scrutton
L.J.
in
Slingsby
V.
District Bank, Ltd.
119321
1
K.B.
544,
559, and Devlin
J.
in
Chao
v.
British Traders and Shippers,
Ltd.
[1954]
1
All
E.R.
779,
787.
Mr. Maurlce Megrah has forcefully
criticised this view in an article,
I‘
When
is
a cheque not a cheque: the
liability
of
a
collecting banker
”:
(1959)
25% L.T.,
p.
145.
16
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