LEAVE. FIRST READING. (Hansard, 15 February 1876)

§ MR. J. G. HUBBARD
, in rising to move that leave be given to bring in a Bill to explain the Law relating to Cheques or Drafts on Bankers, said, that before 1854 cheques were distinguishable from bills of exchange in several important particulars. They were payable exclusively to bearer on presentation in cash; they were unstamped, and were assignable by delivery. In 1854, however, the right hon. Gentleman the Member for Greenwich (Mr. Gladstone), in one of his Stamp Acts, assimilated with cheques to bearer cheques to order, which were' to be unstamped. In 1856 legislation took place to enable the crossing upon a cheque to become an essential and integral part of the cheque itself, so that the crossed cheque became payable only through a banker. In 1858 a further change took place with regard to the stamp duties, the cheques upon bankers, whether payable to bearer or to order, were to be stamped with a penny stamp. Another clause was introduced into the Act of 1858. A banker was responsible for the genuineness of any endorsement upon a bill of exchange which was addressed to his house, and which he paid; but a banker, from the very necessity of the ease, when the now instrument of which he was speaking was introduced, was exonerated from any liability as regarded the responsibility for endorsement, so that, so far as that responsibility and the stamp duty were concerned, cheques became very different documents from bills of exchange. Under the then provisions of the law those cheques to order became one of the safest and most convenient mediums of making payments, either for trade or personal purposes, and to a large extent did away with the necessity of using Bank-notes. The money for them could be received by nobody but the person for whom it was intended, for if one of those cheques fell into the hands of a 316 thief, he could do nothing with it, being crossed to a banker, unless, indeed, which was very improbable, he happened to have a banker of his own, or a confederate who was in that position. In the event, therefore, of the cheque being presented for payment the banker would have the means of tracing the thief and bringing him to justice. Under the operation of a form of payment so convenient, not only trading operations, but personal payments or tradesmen's bills were easily dealt with, and on the cheque, when once paid and returned with the endorsement of the payee, there was a full discharge of his claim. Within the last 12 months, however, the security and convenience of that form of payment had been very rudely assailed. Mills and Co. drew a cheque for £21 on the Union Bank of London, payable to the order of Smith, who, having endorsed the cheque and crossed it with the name of his own bankers—the London and County Bank—gave it to his clerk to pay into his account. The clerk was waylaid by a thief, who stole the cheque, and passed it to a man named Thurger for £8 10s., who in his turn passed it on to a person with the initial "C." a customer of the London and Westminster Bank, who paid the cheque in there, and the bank, not looking particularly to the nature of the crossing, presented it to the Clearing House, and there, equally without examining the crossing, the Union Bank by pure inadvertence paid it. Smith, when he discovered his loss, applied to the Union Bank, which he held to be responsible to, him. The Union Bank, however, not unnaturally disliked to pay twice over, and said they would fight the question of responsibility. They accordingly fought it, and, unhappily for the trading community, they succeeded in the suit, which was tried in the Court of Queen's Bench, when Mr. Justice Blackburn decided that Smith, the plaintiff in the case, had no valid claim, because "C." the holder of the cheque, was a honâ fide holder, and was, therefore, entitled to the money which he received. Against that decision there was an appeal to the Superior Court, when the judgment of the Court below was affirmed; the argument of Mr. Justice Blackburn as to the inexpediency of not restraining the negotiability of the document being there re- 317 peated, while the Judges evidently felt that there was something wrong, because they did not deny that nothing could be more distinct than the provisions of the Act of 1858, which set forth that any banker paying a cheque crossed with the name of a banker to any other banker than the person named in the crossing should be held to have done wrong. But as no penalty was attached to that provision, it was maintained that if it was intended to be anything more than a caution, it ought to be carried further by means of legislation. Now, that was what he proposed to do. The Judges in both Courts, he might add, contended that "C." must be held to be the bonâ fide holder, and had assumed that it was so admitted on the part of the plaintiff; but he was in possession of a statement of the attorney for the plaintiff, in which, in the most distinct terms, he repudiated the idea that his client or himself had for a moment admitted the bonâ fide ownership of "C." They, on the contrary, maintained that the cheque, being crossed with the name of a specific banker, constituted a warning to him which precluded him from becoming the bonâ fide holder. As to the question of negotiability which had been raised, he believed that it was in the case to which he referred a perfect figment. Negotiability involved the existence of a bargain, and in the case of bills of exchange there was a bargain, and the price to be given for them, therefore, became matter of negotiation. A cheque, however, was subject to no bargaining, and it was payable immediately. The only price which could be given for it was the amount which it bore upon its face. Nor were these cheques negotiable in the same way as bank notes. Bank notes passed from hand to hand without responsibility for their nominal value. Cheques were the creation of the individual for his own convenience; whereas bank notes were the creation of the sovereign power. They were paper money, and the banks which had the delegated power of issuing them paid a considerable revenue on account of that privilege into the Exchequer. If cheques were to be placed on the same footing, it would enable the individual of his own motion to do that which the banks could only do by the delegation of the State, and thus the Exchequer would be deprived of a con- 318 siderable amount of revenue. To make a crossed cheque transferable like a bank note would be impolitic and destructive to the purposes for which it was created by the drawer. It was not created to pass from hand to hand, but to make a payment from his own banker to another individual. The House would, therefore, see that the negotiability stipulated for as an attribute of crossed cheques was most unreal, and, if it could be realized, would be most destructive and impolitic. Further, the drawer wanted to make a payment through his own banker to a certain individual and to get a receipt; and if it was delayed there were two risks, as the banker might fail, in which event the drawer might have to pay the money over again. The simple remedy he had to propose was—first, that a banker having paid a cheque wrongfully, in violation of the statute, should not thereby be discharged from the liability intended to be imposed upon him by the directions of the cheque; and, secondly, that he who should steal, or whose confederate should steal, a crossed cheque should not by that theft acquire a title in a document which was distinctly, from its nature and contents, not intended to pass from hand to hand. His Bill was confined to these two points, and he hoped it would receive the sanction of the House. In conclusion, the right hon. Member moved for leave to introduce the Bill.

§ MR. GREGORY
, in seconding the Motion, expressed, as a man of business experience, his thanks to the right hon. Member for the City of London for having proposed it, as it dealt effectively with a subject of great importance to the commercial classes in this country. He regretted his right hon. Friend had not been one of the counsel in the case; for if he had been retained the result might have been different. Although, no doubt, an appeal might be preferred against the judgment of the Court, having regard to the constitution and strength of that Court, he did not think there would be much chance of such an appeal being successful. There was one point in his judgment, however, on which he might be allowed an observation. The Judges seemed to have assumed that the presenter of the cheque was a bonâ fide holder of it; but by the Act 21 & 22 Vict. it was distinctly laid down that the crossing of a cheque was an integral 319 part of the cheque itself; and, therefore, how any person could be a bonâ fide holder who taking a cheque so crossed paid it to one when it was crossed to another banker he was at a loss to conceive. But for present purposes we must accept the judgment of the Court, and deal with it as we found it. He was glad to think that further legislation on the subject had been suggested by the Lord Chancellor himself. In his opinion, the Bill now introduced by his right hon. Friend was so moderate in itself, and so well calculated to remove the grievance occasioned by the judgment, that he trusted it would receive the sanction both of the House and of Her Majesty's Government.

THE ATTORNEY GENERAL
said, he did not desire in the least to oppose the introduction of the Bill, which might prove to be a very excellent and beneficial measure. On this point, however, he did not at present wish to pronounce any opinion. He believed that the Bill, if it were to be operative in the direction in which it was intended to be operative, must be a Bill to restrain the negotiability of crossed cheques. That might be a very wise and politic measure to introduce, and he would say nothing further on that point; but, as the decisions of the Court of Queen's Bench and the Court of Appeal seemed to have been arraigned, perhaps the House would pardon him if he made a remark or two about that. The facts of the case, which had been already detailed, were very short and simple. Mills and Co. had drawn a cheque in favour of Smith, payable to Smith's order. After Smith indorsed it, it was stolen from his clerk, and it went through a few hands, or a number of hands, until it came, as was admitted, for value, into the hands of "C." According to the view which the Courts took of the matter, that cheque could not be paid to anybody but "C." It could not be paid to Smith, and if the Union Bank of London committed an error in paying it—as they undoubtedly did—still they had not done any injury to Smith, the plaintiff in the case; because under no possible circumstances could he have recovered the amount for which the cheque was drawn. Therefore, the whole judgment of the Queen's Bench and of the Court of Appeal—over which the Lord Chancellor presided—was founded on this—that the Act of 320 1858 did not by its provisions restrain the negotiability of cheques—that cheques crossed in this way were negotiable, and that this particular cheque having been negotiated. Smith, who was the plaintiff, could not be damaged by its having been paid in the way it was. And now he would say a few words concerning the negotiability of a cheque. The law at present was—it might be desirable to alter it, but the law at present was—that a cheque made payable to bearer was negotiable—that was to say, it might pass from hand to hand. It was a mandate to the banker with whom the drawer had assets to pay the money to anybody who presented the cheque. So with regard to a cheque payable to order; it was a mandate to the banker to pay the money to any person who might be authorized to receive it. The meaning of negotiability was that the document passed under such circumstances from hand to hand. This was the law, and the view the Courts took was that there was nothing in the Act of Parliament which interfered with or altered the law in this respect. In his humble opinion, that view was perfectly sound and right. Reference had been made to some admissions supposed to have been made by the plaintiff's attorney or counsel with respect to the fact that "C." was a bonâ fide holder for value. Whether he was or not was a question of fact, with regard to which he knew nothing; but he did know that the question could not have been brought before the Court to be disposed of as a legal question unless it had been admitted or taken for granted that "C." was a bonâ fide holder for value; because if the question had been left at large whether "C." was a bonâ fide holder for value, that was a matter which would have been disposed of by a jury, and not by the Judges. Having made these remarks, he did not wish to offer the least opposition to the Bill.

MR. FORSTTH
agreed in the expediency of the Bill being brought in, though he thought that the judgment of the Court of Law ought not to be challenged. In the case referred to the proper appeal was not to the House of Commons, but to the House of Lords sitting as a judicial tribunal. It would be unfortunate if this House were to proceed on the ground that the judgment of 321 the Court was wrong. It was better to assume that the judgment was right, and to say it was desirable to alter the law. He thought the judgment was right for technical reasons, with which he would not trouble the House; but he would endeavour to show that it was desirable to alter the law, and that this Bill would do it effectually. The law laid down was that although if a person who had a cheque given to him crossed it to a particular bank, yet if it got into the hands of a bonâ fide holder, the crossing of it, even if it had been stolen from the payee, would be no protection, and it might be presented through any banker for payment. That seemed to him dangerous, because the object of crossing was to prevent its being paid by any banker except the banker whose name was crossed upon it. Such a payment was, however, held to be good in the case which had been referred to. He did not agree with his right hon. Friend that cheques were not negotiable. They were. They passed from hand to hand constantly; but if they went through a dozen hands it ought to be provided that they should ultimately be paid only though the banker whose name was written across them. It was an unfortunate feature of the case under consideration that the cheque was stolen, and yet that the thief was enabled to give a bonâ fide title to another holder, so that by that means the latter was enabled to procure payment of the amount for which the cheque had been drawn. If the Bill which his right hon. Friend asked leave to introduce passed, the thief would not be allowed to take advantage of his theft, nor would a person who had stolen a cheque be able to give a better title to another person in respect of it than he himself possessed. By that means the inviolability of the cheque would be maintained and a panic such as the judgment in question had occasioned among the commercial community would not again occur.

§ SIR GEORGE BOWYER
regretted that occasionally Judges started new and ingenious points which gave rise to great inconvenience. People went on with their business believing that they were acting in strict accordance with the law, when suddenly a question arose, ingenious counsel started a novel point, it was adopted by the Judge, and long-established usage and practice was at 322 once upset. For his part, he held that a person who took a crossed cheque was party to a contract. If it was crossed to a particular banker, he agreed that he would receive payment through that particular banker, and not in any other way—the drawer having secured himself against loss by the crossing of the cheque. That appeared to be a sensible and intelligible view of the case, and when he was told that the holder of the cheque in the case alluded to was a bonâ fide holder, he demurred to the assertion. Even though he had given full value for the cheque, he was not, in his opinion, a bonâ fide holder—for this reason, that he was a purchaser with notice. He saw on the face of the cheque that it was crossed to a particular banker. That was notice to him and ought to have excited his suspicion. It was not generally negotiable. If it had been, it would be payable to bearer, and if he took the risk of accepting the cheque after notice, he had no reason to complain if he lost his money. His right hon. Friend the Member for the City of London had, he thought, done good service to the commercial community by introducing a measure which would have the effect of placing the law on the subject beyond the reach of doubt.