JUDGMENT OF THE COURT OF APPEAL ON CROSSED CHEQUES.

Bay of Plenty Times, Volume IV, Issue 370, 29 March 1876, Page 3

JUDGMENT OF THE COURT OF APPEAL ON CROSSED CHEQUES.

(^Froin tlie The judgment which has now been; given by the Court of Appeal in "Smith v.. the- Union Bank" is most unfortunate,, and will do much, unless the law. is speedily altered by Act of Parliament,, to. destroy the utility of the crossing, system.. The decision is to the effectf that a banker is justified in paying a cheque to a different banker to the one named in the crossing — a t least, that no action can be brought against him by the holder who had endorsed the cheque, and from whom it had afterwards been stolen. The facts were that the plaintiff had received' a/ cheque on the Union Bank from Mills and Co., and endorsed it, and' crossed it "London and County Bank ;" but the cheque was stolen, and coming intO'tine hands of a Una fide holder for value r a customer of the London and Westminster Bank, was presented through that company to the Uhion<Bank, and paid, notwithstanding the crossing. The plaintiff,- as holder sued the Union Bank fon paying the cheque, contrary to the statutes 19th and 20th Viet., cap. 25th,, 21st, and 22nd, Viet., cap. 79, on the subject of crossed cheques. The Court,, however, have held that the holderis not entitled to sue. The crossing, tney say,, was intended for the drawer's benefit, and as he was not damnified, his payment of the cheque having been a good payment, he cannot sue, nor can any other person. The Legislature had. not said that anyone-takingthe cheque was to take it at his-, peril, and as the cheque was finally in the hands of the lawful holdeiv whom the Union Bank had paid, they could not be sued for doing so. It follows from this that any holder of a cheque endorsed, it ceases to be protected by the- crossing.. If it has been. stolen foojahim and gets- into the hands- o£ a bona fide holder for value,, and is presented through any bank, the paying bank is justified, and he has no redress.. Now,, this judgment, however well founded legally and technically,, is entirely contrary to mercantile usage and the common sense' of the matter: The understanding is that the crossing is imperative — that, the cheque is not to be paid* except to>iihe particular banker named upon.it, and pace the Court. o£ Appeal,, this is intended for ■the benefit of all concerned, and not merely for the drawer. Indeed,, as the crossing is necessarily to, the banker of the holder who receives the cheque, it is primarily as much for his benefit,, and not merely for the benefit of the drawer, that the crossing is made. The Court of Appeal seem to have been puzzled by the difficulty that if they had decided differently from what they did. the cheque would have been payable- to nobody,, as it had come into>the hands of a bona fide holder, and if he was not to be paid, neither-could anyone else. They also thought that such holder might have evaded the crossing in. two ways — j either by going to the drawer arid getting a fresh cheque^ or by opening an account with the banker named and getting payment through him. But this reasoning is most refined, and. contrary to the common sense of the matter. If crossing is to be good for anything at all, no crossed cheque can come into the hands of a lona fide holder for value other than the-lawful owner. Anyone offered' a cheque so crossed; the meaning, of which is that it was only to be paid to the holder's banker, would, at once know that at some stage- or other the cheque had got iuto^the hands of its lawful owner by improper means. As it is, considering the established, usage about cheques, we are suprised that any banker took a: cheque from a customer crossed to another bank, and- that, the cheque was paid without demur, unless, as we believe, it occurred through inadvertance. The crossing, . as commonly understood, is-, in fact). a restriction of the bank endorsement to the banker named, converting the endorsement'in blank into an endorsement by name, and if this is not understood the security intended, by. the crossing is not given. "We hope,

therefore, a short Act will bo speedily introduced . into Parliament removing the difficulty which has been made. Nothing will be* simpler than to declare that that-, the crossing of a cheque to a particular banker shall be imperative,, and 1 a warning to all that such a cheque is not negotiable like any other— that whoever takes it, unless the particular banker named, does so at his peril. We should have thought that this resulted from the former enactments, but as the Court of Appeal has thought differently there is no remedy but a fresh enactment.