BILLS OP EXCHANGE.

Taranaki Daily News, Volume LVII, Issue 56, 27 July 1914, Page 6

BILLS OP EXCHANGE.

MAINLY CONCERNING CHEQUES. A USEFUL ADDRESS. At a meeting of the New ..Plymouth branch of the New Zealand Society of Accountants on Friday night, Mr C. 11. "Weston delivered an interesting address on Bills of Exchange, dealing exclusively with cheques and with the liability o'r otherwise of bankers who pay cheques under varying conditions. He also set forth lucidly the protection afforded lo drawers by" various methods oi drawing their cheques. In dealing with the subject, Mr. Weston took as an illustration the case of an auditor who was called in to investigate tins defalcations of the funds of a private linn. Mr. Weston's accountant was presumed to have 'been a person of some resource. He had forged some cheques, he had increased the amounts m others, he had endorsed others without authority, and has forged endorsements to cheques drawn to order, lie had, moreover, stolen cheques drawn by and paid to his linn, and altered '•order" cheques to "pay cash." He had kept his own banking account, where he had paid in the stolen cheques, and had also cashed them at his firm's and other banks—some of the cheques were crossed, and paid by mistake by the bank's teller. Mr Weston then proceeded to consider, firstly, the liability of the accountant's bank, secondly, that of the. paying banks, and thirdly that of the defrauded firm's bank.

As a preliminary, he explained the principles affecting cheques and their negotiability. They were, he said, negotiable instruments, and the word nenotiable was derived into two elements: transferability, and also an exception to the general rule of law that the transferer of property could not give more than he owned. A negotiable instrument was an exception to this rule m that a person who accepted it in good faith and for value with no notice of defective title (and in tiie case of a bill of exchange before it was due) got a good title. This was where the special characteristic of a cheque marked "not negotiable" came in. This marking meant that the cheque was transferable, but was deprived of that peculiar character. Under section SI of the Bills cf Sale Act, the holder of the "not negotiable" crossed cheque could get only the title which the original holder possessed. The advantage of thus marking a cheque was that if it was lost or stolen, its value could be recovered from a person who would otherwise hare been a duly protected "holder for value." A cheque marked "not negotiable" was not, however, therefore crossed. It was merely as an addition of words to a crossing that they were significant. Mr Weston then proceeded to deal with the liability of the bankers un.ier the circumstances he previously mentioned. Regarding the accountant's bankers who had placed cheques to his credit, it teemed on the face of it hard that tin y should be liable, because they made nothing out of the transactions, but the li.'ink was in a same position as the auctioneer, and as a party (or agent) to a conversion was liable to the true owners of the cheque. An agent on hehalf of a principal who obtained goods not his principal's property, was liable to the true owner, (bind faith was no" defence, so that the amount of the increased cheques handled by the guilty accountant's bank must be refunded. There were, however, still two defences for the collecting hanker, namely, that he was not a mere collector, but a holder for value, namely that the cheque was paid in in reduction of an overdraft or that was paid in under the condition that it should be immediately drawn against. This defence was, however, taken away if the endorsement wns forged, if the eheque were "not negotiable" (which was one instance of the value of this working) because the corlecting banker acquired no better than the forger had. Forgery gave no title to anyone, not even to a holder for value. The second possible defence by the bank was that the proceeds of the cheque had reached the true owner, but this was shadowy and remote. >So that the position ni a banker wlio accepted umTossed cheques was bad. With regard, however. to crossed cheques it was better I section 2 of the Hills of Fxchangc Act). If the accountant had stolen a number of crossed cheques the collecting banker was not liable, under certain conditions. .First, he must show that lie accepted them in good faith and without negligence for a customer. A banker could not. however, bring himself within these conditions by crossing all cheques himself, not could he claim protection if it were crossed by an unauthorised person, and if the endorsement was forged he had no title in law. As to the question of negligence, a cheque endorsed "per pro" without authority made tin- banker liable, because the principal was only bound by the terms of his authorities. The guilty accountant's banker, seeing such cheques put through his own account, should be on his girard. If tl'e cheque were marked "account payee," lie was also liable, because such "cheque should have been put through the (inn's own ibank. That, remarked "Mr Weston, exhausted the defrauded linn's remedies against the accountant's bank. As to the other bankers who had increased open cheques, they were safe if thev paid in good faith and without negligence, A banker who paid a crossed cheque which was presented by the accountant's bank was not liable if he paid in accordance with the crossing. If a crossed cheque were fraudulently altered to "pay cash," added bv the at- I (■.mutant, who forged the firm's initials. ' the bank was liable, as the words were j unauthorised. Jn the case of a cheque I to order on which the endorsement was forged, the paying banker, despite the law as to forgery, was specially protceted if he paid in good faith and without negligence and in the ordinary course .if business. In the ease of a mistake by the teller in paying a crossed cheque, the bank was liable became to pay cash for such a cheque was not the ordinary course of business. The same applied to payment not in accordance with the endorsement. As to the linn's own bankers, they were liable for payment forged cheques, but ill the case of those in which the amounts had luen fraudulently incieased, they protected only up to the original amount of the cheque so that the lot of the banker was not a happy one.