S. 74. S. 75. But before the drawer can be made liable the cheque must be presented, and notice of dishonour must be given, except when presentment or notice is dispensed with.1 The indorser of a cheque is discharged by failure to present duly or to give notice of dishonour, except where presentment or notice is dispensed with.2 3 A cheque was drawn upon a bank on a Saturday, and on the same day was deposited by the drawer with another bank, and by the second bank with a third, all in the same town. On the following Monday the cheque was presented by the third bank to the first, which dishonoured it and subsequently failed. Though it was admitted that the cheque would have been paid on the Saturday, it was held that it had been presented in reasonable time. The rule in England before the passing of the Act was that a cheque payable at the place where it was received by the holder had to be presented on the day after it was received, and that if it was payable at a distance from that place, it had to be sent for collection at latest on the morning after it was received, and presented by the agent for collection on the day after it was received by him. But under the Act this rule is subject to modification according to the circumstances of the case.5 75. The duty and authority of a banker to pay a cheque drawn on him by his customer a are determined authority, by b Revocation o! banker's (1.) Countermand of payment: (2.) Notice of the customer's death.a a A banker is bound, when he has sufficient funds in his hands, to honour cheques drawn upon him by his customer, in accordance with the arrangement between them, so long 1 Ss. 46 (2), 50 (2); Thomson, 119. 3 Gaden v. Newfoundland Savings 92. 4 Thomson, 119; Byles, 21, 22. 6 Struthers Patent Diamond Rock Pulveriser Co., Limited, v. Clydesdale Bank, 1886, 13 R. 434. as the relation of banker and customer exists. A banker S. 75. inay by notice terminate that relation, but does not thereby free himself from his obligation to pay cheques issued prior to the receipt of the notice by the customer.2 There is nothing more plain than this, that while a customer has funds in a bank, his right to draw on his account is absolute, unless the bank has a right of retention over the money, or some other equally good answer."3 In the case of Ireland v. North of Scotland Banking Company, the defenders, who held £413 belonging to an executry estate on current account, refused a cheque by the executor for £100 on the ground that the estate was insolvent, and that they had a claim against it and intended to apply for sequestration, but it was held that they were bound to pay. In Paul and Thain v. Royal Bank of Scotland 5 it was held that the defenders were bound to honour a cheque by their customer for the whole balance of his account, though they held a bill drawn by him, there being no allegation that he was vergens ad inopiam. But a banker is not bound to honour cheques beyond the amount of his customer's account, unless he has come under a definite obligation to grant an overdraft. And even where a customer has a cash-credit on security, the bank is entitled, in the absence of express stipulation, at any time, or at least on reasonable notice, to withdraw the credit, though the amount overdrawn has not reached the limit of the cash credit.7 If the banker does not fulfil his contract he is liable in substantial damages to the customer if his credit has been injured, and in nominal damages for breach of contract, even though the customer has sustained no injury.9 b Sequestration.-Cheques granted by a bankrupt after 1 S. 75. sequestration are null, for the bankrupt is divested of his estate; but those granted before sequestration are effectual, subject to the rules of bankruptcy as to fraudulent alienations and preferences.2 S. 76. c Countermand of payment does not affect the rights of the holder of a cheque for value, who may either sue the granter,3 or by an action of multiplepoinding, to which the drawer should be a party, call upon the bank to account for any funds of the drawer's in their hands at the date of presentment.4 a The banker is thus entitled to credit for cheques paid before he receives notice though after the customer's death. Notice of death does not affect the rights of a holder for value.5 Crossed Cheques. Crossed cheques originated in a practice of the clearinghouse by which cheques lodged there were marked with the names of the bankers lodging them for the purpose of making up their accounts. Then persons drawing cheques adopted the practice of marking their cheques with the name of a banker, or with a general crossing, with the object of securing that they should be paid through a banker, and the crossing began to be recognised by bankers as a direction to pay only to a banker, but it had no legal effect except that payment in disregard of it might be evidence of negligence. In Bellamy v. Marjoribanks' a jury found that there was a custom and usage in consequence of which there was a duty upon bankers upon whom a specially crossed cheque was drawn, to pay only to the banker mentioned in the crossing. The Court set aside this finding both on the ground of want of evidence and 1 19 and 20 Vict. c. 79. ss. 29 42, 102. 2 See s. 97, p. 195, infra. 3 M'Lean v. Clydesdale Bank, 1883, 10 R. 719; affd. 1883, 11 R. (H.L.) 1 L.R. 9 A.C. 95; Glen v. Semple, 1901, 3 F. 1134. 4 Waterston v. City of Glasgow Bank, 1874, 1 R. 470, 481; British Linen Company Bank v. Carruthers and Fergusson, 1883, 10 R. 923. 5 Thomson, 244; n.c, supra. 6 Bellamy v. Marjoribanks, infra, per Park, B.; Stewart v. Lee, 1828 Moo. & M. 158. 70. 7 1852, 7 Exch. 389, 21 L.J. Ex. because it could not be supported in law. In Carlon v. S. 76. Ireland1 it was held that a bona fide holder for value of a specially crossed cheque was entitled, though it had not been paid through the bankers named in the crossing, to retain the amount against the true owner. Thereafter in the same year it was enacted that a special or general crossing by the drawer or holder (see the preamble) should have the force of a direction to the bankers upon whom the draft was made, that the same was to be paid only to or through some banker, and the same should be payable only to or through some banker.2 But in Simmonds v. Taylor 3 it was held that a crossing was not part of a cheque, that the erasure of it was not a forgery, and that though a cheque had been crossed by the drawer, the banker on whom it was drawn was entitled after the crossing had been erased to pay it over the counter and debit the drawer with the amount. Further, the opinion was expressed that a banker could not be made liable for neglecting to comply with a crossing made by any one except his customer.4 In consequence of this decision the Act 21 and 22 Vict. c. 79 was passed. It provided (1) that a crossing, special or general, should be a material part of a cheque, and, except as thereinafter mentioned, should not be obliterated or added to, and that specially crossed cheques should be payable only to the banker named, and generally crossed cheques, only to a banker;5 (2) that a holder might cross a cheque generally or specially; (3) that the fraudulent obliteration or alteration of a crossing should be a forgery;7 (4) that unless cheques, when presented for payment, appeared to be or to have been crossed, bankers paying them should not incur liability on account of their having been crossed. On this enactment there followed the decision in Smith v. Union Bank of London. A cheque payable to the order of the pursuer, indorsed generally by him, and crossed by him "London and County Banking Co." was stolen, and came into the hands 6 S. 76. of a holder in due course, who paid it in to his bankers, the London and Westminster Bank, to whom, notwithstanding the crossing, it was paid by the defenders. It was held that the pursuer could not recover from the defenders, because the Act last cited did not restrict the negotiability of cheques, and payment had been made to a lawful holder entitled to retain the cheque against the pursuer and all the world. It was also held that the pursuer could not maintain an action on the ground that the payment had been made contrary to the statute, because the person whom the statute was intended directly to benefit, was not the holder of a cheque but the drawer. Thereafter the Crossed Cheques Act, 1876, was passed.1 It repealed the Acts 19 and 20 Vict. c. 25, and 21 and 22 Vict. c. 79,2 and consolidated their provisions. It further introduced the crossing with the words "not negotiable," and made bankers liable to the true owner for loss sustained through payment in contravention of the crossing. The Act of 1876 is repealed by this Act, and its provisions are reproduced with slight modification by the following sections. S. 76. General and special crossings defined. 76. (1.) Where a cheque a bears across its face an addition of (a.) The words "and company" or any abbrevia tion thereof between two parallel transverse lines, either with or without the words "not negotiable ""; or b (b.) Two parallel transverse lines simply, either with or without the words "not negotiable ""; that addition constitutes a crossing, and the cheque is crossed generally. (2.) Where a cheque bears across its face an addition of the name of a banker, either with or without the words "not negotiable," that addition constitutes 1 39 and 40 Vict. c. 81 2 S. 2. b 3 Ss. 4 and 12; sss. 76 and 81 hereof. S. 10; s. 79 (2) hereof. |