CHEQUES BILL (Hansard, 6 June 1957)

§ LORD JESSEL

My Lords, I beg to move that this Bill be now read a second time. Anyone who knows anything about this Bill will immediately connect it with the name of Mr. Graham Page, a Member of another place. It was in 1955 that he introduced a Private Member's Bill which was designed to reduce the need for endorsement on order cheques which were not negotiated but paid into the payee's bank account. Although that Bill died a natural death, nevertheless the Chancellor of the Exchequer of the day was sufficiently impressed to appoint a Departmental Committee under the chairmanship of Mr. Mocatta, Q.C. Among those on that Committee was the noble Lord, Lord Chorley, whom I am glad to see here to-day. I hope that he will speak later and will give me some support, and also put me right in any errors I may make; his experience is greater than mine for I am comparatively new to this subject.

The Mocatta Committee held twenty-five meetings and took evidence, both oral and written from every conceivable interested body. This Bill seeks to implement the main recommendations of the Mocatta Committee and to include certain improvements made in another place. It is probably not realised that 90 per cent. of the order cheques drawn are paid by the payee direct into his own banking account. The amount of time wasted in this connection with cheque endorsements is staggering, for 730 million cheques a year are endorsed for no real purpose; and 2 million man hours are wasted by bank clerks looking at them. Probably an equal amount of time is wasted in business by the signing of names on the back of cheques. The law as it stands to-day does not explicitly require endorsement by the payee but the banks have insisted on that to protect themselves. This Bill does away with any need for banks to insist upon endorsements.

May I turn for a moment to the Bill? Clause 1 says that if a banker in good faith and in the ordinary course of business pays a cheque drawn on him which 268 is not endorsed, or alternatively is irregularly endorsed, he does not incur any liability by the fact that it is not endorsed. Subsection (2) of that clause extends this protection to various other instruments, whether or not endorsed or irregularly endorsed, other instruments here being such things as dividend warrants, bankers' drafts and so on. Clause 2 gives protection to the collecting banker who receives the cheque for collection. Clause 3 provides that an unendorsed cheque is good evidence of payment by a banker. In connection with this clause, I should mention the common commercial practice of endorsing receipts on the back of cheques. I understand that banks are willing to continue this service to customers by special arrangement if they so desire.

Clause 4 gives bankers the same protection in regard to the collection of uncrossed cheques as they now enjoy under Section 82 of the Bills of Exchange Act, 1882, in respect of crossed cheques. Clause 5 brings to the instruments the same protection as is given to crossed cheques under Clause 4. Clause 6 repeals Section 82 of the Bills of Exchange Act, 1882, as its provisions are taken care of under Clause 4 of this Bill. Clause 7 needs no particular comment: it makes the Bill applicable to Northern Ireland. Clause 8 says the Bill shall come into operation three months after its passing. I understand that this provision was made at the request of the clearing banks, in order to give them sufficient time to adapt themselves to the new procedure.

I am trying to be brief, but I must emphasise that this Bill, though a short one, is immensely important to industry and has the support of all sections of the community—not only industrialists but the bankers themselves. The principle of the Bill—that the endorsing of a cheque represents a really useless waste of time—has been thoroughly examined by all concerned from every angle; and this Bill represents the culmination of many years' work. I hope, therefore, that it will meet with your Lordships' approval. Before I conclude, may I give one word of warning: this Bill is not yet law, and when, next Monday, your Lordships receive your Derby winnings cheques, please remember to endorse them. I beg to move.

§ LORD CHORLEY

My Lords, as your Lordships have heard, I have a kind of interest in the Bill, in that I was a member of the sub-committee referred to by the noble Lord who has moved its Second Reading, and I am grateful to him for what he said. I am afraid, however, that I shall not be able to give him quite the support he evidently expected. The Mocatta Committee, as it is familiary called, was appointed by the late Chancellor of the Exchequer to do two things: first, to examine the practical need for a reform of the law—that is to say, whether the results would be sufficiently worth while to make desirable what obviously was going to be quite an important change in the law; and secondly, assuming that might be so, to report on the kind of changes which would be needed to carry that reform through, because obviously the repercussions were going to be of some importance.

As the noble Lord, Lord Jessel, has said, the Committee was appointed because of the Bill which had been introduced in another place by Mr. Graham Page, and I should like to take this opportunity of adding my tribute. Mr. Graham Page's pertinacity in regard to this matter has been most commendable, and the banking world is or certainly should be, very grateful to him. I could only wish that his wisdom had been equal to his pertinacity, in which case we should have had a Bill which I could have supported more wholeheartedly than I can support the present one. At the same time, one should, I think, also pay tribute to other people in the banking world, particularly Mr. Papworth, whose enthusiasm and pertinacity, at an even earlier stage, had a great deal to do with enlisting the support of the banking world and other parts of the commercial world for this particular scheme.

I should like, too, to express my own appreciation of the tremendous work which was put into this business by Mr. Mocatta himself. I have worked on a number of committees of this kind, but I have never known a chairman take a matter more seriously. Considering that he is, perhaps, the busiest commercial leader at the Bar at the present time, it was wonderful how much time he forced himself to give to a matter which 270 he clearly regarded as of the greatest importance. We had the advantage of the assistance of important members of the business world, some of whom had served on committees of this kind before; and it struck me, as no doubt it has struck others of your Lordships on other occasions, how much the community owes to the work which is done in this completely self-sacrificing way by prominent members of the commercial and industrial world, serving on committees of this kind without any sort of reward—often, indeed, at financial loss to themselves—very few even getting any recognition in the way of decorations or anything of that kind at the end of the work.

I entirely agree with everything the noble Lord, Lord Jessel, has said about the practical importance of getting rid of these endorsements on cheques of the kind to which he has referred—that is, those payable directly to the payee which the payee takes and pays into his own account in the bank after he has endorsed them. An enormous amount of time is wasted on these millions and millions of cheques in this quite unnecessary endorsement Practically all the evidence we had showed that that was so, and we had no difficulty in coming to the conclusion that there was a need, on the practical side, for a reform of the kind which Mr. Graham Page had been advocating. When it came to the question of the changes in the law which were required in order to carry out this reform, the matter was very much more difficult. We found (and this was clearly the opinion of all of us) that if this was to be done without a considerable degree of prejudice to the rights of the ordinary citizen who uses a banking account, and without changes in the law which might have very considerable repercussions and quite grave consequences, it would have to be effected with considerable circumspection and a great deal of caution. And we devoted meeting after meeting to trying to work out a scheme by which this could be done without these grave risks and repercussions. And the reasons for these warnings, I think, are clearly set out in our Report.

In these circumstances, and in view of the importance of this subject—for no-one, I think, can doubt that it is a matter of very peat importance indeed—one might have expected that the Government 271 would take over the job of providing the necessary legislation. But they did not think to do so. Apart from the usual tributes to the Mocatta Committee, and a very pleasant luncheon party, which we all enjoyed enormously, at No. 11, Downing Street, charmingly presided over by the then Financial Secretary to the Treasury, the Mocatta Report, so far as the Government were concerned, seems to have been dropped and no further interest seems to have been taken in it.

Mr. Graham Page was left with the job of carrying on with the good work and introducing a Private Member's Bill, which was, in the ordinary way, debated late on a Friday, when very few of those Members in another place who are properly qualified to take part in a discussion of this kind were able to be present, and when, in fact, serious criticisms which had already been appearing in the legal papers were completely ignored—because the Bill departs in a number of respects, which I regard as fundamental, from the recommendations of the Mocatta Committee. It confers on the banks a number of new rights and privileges against their customers for which they did not ask, for which they were quite careful to say they did not wish to ask when their representatives came before us, and which I certainly do not think they ought to have.

I may say that, in making these criticisms. I have the support of Mr. Mocatta himself, with whom I have discussed the matter. He has authorised me to say that he regards these departures as serious, and that he thinks they will be serious defects in the law if they go through as the Bill stands. I have been informed that the Government have lent the assistance of the Parliamentary draftsman in connection with this Bill. If that is so, I find it very difficult to understand how he can have allowed these proposed changes in the present law to go into this Bill without warning the Government of the effects which they are likely to have. Yet no real attempt was made to discuss these matters during the Second Reading debate in the House of Commons. Mr. Graham Page, in the course of his speech, said that he was proposing to depart in a number of respects from the Report of the Mocatta Committee. He said that he had had the best banking and legal advice which he could 272 obtain. On that basis he thought that there was a more straightforward method as contained in his Bill. He proposed to ask the House to bear with him while he explained what this was. I have read the rest of his speech very carefully, and that seems to have been the last that he said in reference to it. The Government, through the then Financial Secretary, gave the Bill their general support, but they made no sort of effort to explain why the points made in the Report of the Mocatta Committee had been completely ignored. And, of course, the noble Lord who moved the Second Reading of the Bill this afternoon has not explained to your Lordships why the recommendations of the Mocatta Committee in this regard have been ignored in this Bill.

The only really satisfactory way of dealing with these defects would be to throw out this Bill and to start again. If the Government were prepared to do the job which I think is really theirs to do, when a change in the law of England of such importance as this is being made, we could take that course to-day—it does seem to me that such changes should be made in a Government Bill and not in a Private Member's Bill. Clearly, it is too much to expect that that would be so. I appreciate the importance of not losing any more time in regard to this matter. We all know that the banks are on the point of introducing important changes in the mechanical methods of handling cheques, which should save a very great deal of time and money, and they want to bring them in as quickly as possible. It is important that these changes should not be held up. I therefore do not propose to ask your Lordships to divide against this Bill to-day. I propose to make some suggestions on the Committee stage, which I hope may commend themselves to your Lordships.

My Lords, I think that, having made these strictures, I ought to attempt to explain why I and why Mr. Mocatta take such a serious view of the defects which we think there are in this Bill. The law of cheques is one of the most difficult and complicated branches of the whole law of England. I have spent much of my legal life trying to understand it and I am far from saying that I do.