Out PDF

Cheques and Cheque Legislation in the UK and
Canada: Separate Paths in the Past,

Converging Paths in the Future?
Nicholas Wolfe*
The characteristics of the payment instrument of a cheque, together with the
protection afforded to banks paying out on forged cheques, was virtually the same
in the UK and Canada when they passed their Bills of Exchange Acts in 1882 and
1890 respectively. The reason for this is that the Canadian Act was, and continues
to be in many respects, heavily based upon the UK Act. This paper discusses however the differing approach these countries have taken, both practically and legally, since the enactment of these Acts, and evaluates what effect these changes
have had on cheques and the protection of banks. Cheque crossing, which is very
widespread in the UK but virtually non-existent in Canada, will prove key to this
discussion. The paper will centre on the changes brought in by the Cheques Acts of
1957 and 1992 in the UK and the 1966 legislative amendment in Canada that resulted in the new section 165(3), Bills of Exchange Act 1890. The recently-abandoned proposal in the UK to abolish cheques in 2018 will also be briefly discussed,
along with an assessment of the likelihood of Canada following suit.
Les caracteristiques de leffet de paiement que constitue un chèque ainsi que

la protection conferee aux banques honorant des chèques falsifies e taient essentiellement les memes au Royaume-Uni et au Canada lorsque ces deux pays ont
promulgue leur Bill of Exchange Act en 1882 et en 1890, respectivement. La similitude entre la legislation du Canada et celle du Royaume-Uni e tait notable et
lest encore a` bien des e gards. Le present article traite de lapproche differente
adoptee par les deux pays, sur le plan pratique et le sur le plan legal, depuis la
promulgation de ces lois; il e value lincidence de ces differences sur les chèques et
la protection des banques. Lauteur sinteresse principalement a` la pratique du
barrement de chèques, très repandue au Royaume-Uni mais quasiment inexistante
au Canada, de meme quaux changements introduits par la Cheques Act de 1957 et
de 1992 au Royaume-Uni et par lamendement legislatif de 1966 au Canada qui a
donne lieu a` larticle 165(3) de la Loi sur les lettres de change. La proposition
visant a` abolir les chèques a` compter de 2018 au Royaume-Uni, abandonnee il y a
Barrister (England and Wales, Middle Temple), LL.B. Law and German (Cardiff),
LL.M. (McGill). The author is grateful for the assistance of his academic supervisors
Professor Lionel D. Smith and Professor Marc Lemieux of McGill University in
Montreal, Quebec, Canada with the preparation of this paper. He is also thankful for
the support of his parents, Chris and Debra Wolfe, and Ramona Schmitt.
48
BANKING & FINANCE LAW REVIEW
[28 B.F.L.R.]
peu, est e galement e voquee brièvement tout comme la probabilite que le Canada
considère aussi cette question.
1. INTRODUCTION
Bills of exchange have been in existence in England since the reign of Edward
IV, having been introduced due to trade between the United Kingdom and the continent.1 The law relating to these negotiable instruments was codified in 1882 and
resulted in the Bills of Exchange Act2 (BEA3), which remains the basis of the law
in the United Kingdom4 and has been adopted as the basis of the law in Canada,5 as
well as other former British Dominions.6 It should however be noted that the position in Canada is somewhat different to that of the United Kingdom, in that Canada
is a federal state and, as such, both the federation and the provinces have specific
competences as laid out in the Constitution Act 1867.7 Whilst there has never been
doubt as to the constitutional basis of the Bills of Exchange Act in Canada,8 there
has been, as shall be discussed, unease in the province of Quebec where the common law tort of conversion and its relationship with the provincial competence over
Property and Civil Rights9 is concerned.
It is a well-known fact that the characteristic that lies at the heart of these
instruments is that of negotiability,10 causing them to be referred to as negotiable
instruments. There have however, since the enactment of the BEA 1882 in the
UK, been two changes to the provisions of the Act relating to cheques with the
1
2
3
4
5
6
7
8
9
10
Nicholas Elliott, John Odgers & Jonathan M. Phillips, Byles on Bills of Exchange and
Cheques, 28th ed. (London: Sweet &Maxwell, 2007) at 1-001 [Byles].
Bills of Exchange Act 1882 (UK), c 61 (hereafter referred to as BEA 1882).
The abbreviation BEA shall be used to refer to both the UK and Canadian Bills of
Exchange Acts generally. Where the UK or the Canadian Act is to be referred to specifically, the corresponding abbreviation for that specific Act shall be used.
Byles, supra, n. 1 at 1-005.
Bills of Exchange Act 1890 (Canada), RSC 1985, c B-4 (hereafter referred to as BEA
1890).
Byles, supra, n. 1 at 1-005.
Constitution Act 1867 (Canada), 30 & 31 Vict, c 3 (hereafter referred to as Constitution Act 1867).
The BEA clearly comes under the heading Banking, which is a federal competence
according to s. 91(15) and also Bills of Exchange and Promissory Notes which is a
federal competence under s. 91(18) of the Constitution Act 1867.
Cheques are a particular type of bill, drawn on a bank and payable on demand and thus
come under the latter heading, as well as the former. They are, along with bills of
exchange and promissory notes, not however exclusively governed by the BEA, due to
the fact that the Common Law of England, pursuant to s. 9 of the Act, is to apply to
these instruments except in so far as they are inconsistent with the express provisions
of the Act. This shall be discussed further below.
This is a provincial competence according to s. 92(13) of the Constitution Act 1867.
The meaning of negotiability of cheques has often been split into two separate characteristics transferability and negotiability which shall be dealt with immediately
below in Chapter II.
CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA
49
enactment of the Cheques Acts of 195711 and 199212 the former Act reducing
the need for endorsements and providing banks with protection against actions in
the tort of conversion and the latter reducing the negotiability of cheques and
thereby reducing, it was intended, cheque fraud.13
Thus, this paper shall centre on the changes made by these two Acts in 1957
and 1992, assessing their objectives and subsequent impact on the BEA 1882 in the
UK and shall also discuss the changes made in Canada to its respective provisions
governing cheques, evaluating the differences and similarities in these legislative
approaches. The writer will then seek to recommend legislative changes to the Canadian BEA 1890, where necessary, to ensure that the objective of reducing cheque
fraud, whilst affording banks reasonable protection against actions of conversion is
met. The recently-retracted proposal to abolish cheques altogether in the United
Kingdom by the UK Payments Council14 by 2018 shall then be briefly discussed in
the concluding remarks, along with a brief assessment of the decline in the use of
cheques in Canada and the potential of Canada abolishing this payment instrument.
It should briefly be stated at the outset that this project is not intended to be an
assessment of all of the problems within the BEA in relation to cheques and shall
thus not deal with the cheque regimes in the UK or Canada in their entirety. Its
scope shall be limited to the changes brought about by the two UK Cheques Acts
and the corresponding changes in Canada, where applicable.
(a) The Differences

As a point of general introduction, the main differences between the respective
UK and Canadian approaches to the inherent characteristics of cheques and the
protection afforded to banks as regards forged cheques shall be outlined below.
Firstly, the UK, through the enactment of the Cheques Act 1992, restricted the
transferability of crossed cheques, by giving legal effect to such crossing. Canada
has never utilised the cheque crossing provisions in the BEA, rendering such potential recognition superfluous. Due to the passing of the 1992 Act, banks are not to
collect upon third party cheques, with such collection being prima facie negligence
on the part of any bank that does so. This, as will be shown, becomes relevant when
considering the defences available to banks in the respective jurisdictions. Canadian jurisprudence has however indirectly sought to impute such a duty on collecting banks, the success of which shall be evaluated below.
Secondly, the UK grants wider and more extensive defences to its banks
both collecting and paying against claims in conversion. Under s. 4(1) of the
11
12
13
14
Cheques Act 1957 (UK), c 36 (hereafter referred to Cheques Act 1957).

Cheques Act 1992 (UK), c 32 (hereafter referred to Cheques Act 1992).
Byles, supra, n. 1 at 1-004 & 1-005.
UK Payments Council, 2018 target date set for closure of central cheque clearing,
online:
UK
Payments
Council,
online:
<http://www.paymentscouncil.org.uk/media_centre/press_releases/-/page/855/> [UK
Payments Council]; UK Payments Council, Payments Council to keep cheques and
cancels
2018
target,
online:
UK
Payments
Council,
online:
<http://www.paymentscouncil.org.uk/media_centre/press_releases/-/page/1575/> [UK
Payments Council Retraction].
50
[28 B.F.L.R.]
Cheques Act 1957, collecting banks have a complete defence to any claim against
them (for a crossed or uncrossed cheque), even if that claim arises from a fraudulent endorsement, so long as the bank was not negligent. This defence was seen as a
widening of the original s. 82 BEA 1882 defence, which only applied to crossed
cheques. Drawee banks have a corresponding protection in s. 1(1) of the 1957 Act,
but originally could rely on s. 60 BEA 1882 as regards uncrossed cheques, so long
as they had paid out on the forged cheque in good faith and in adherence with
ordinary banking practice. Canadian banks on the other hand are a lot less protected
from such claims. The collecting bank relies on the Canadian s. 165(3) BEA 1890
to become a holder in due course and thus enjoy the special protections afforded to
such a holder, however this defence does not apply to forged endorsements and has
been severely restricted in its application by the Supreme Court of Canada in the
case of Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce.15
Drawee banks cannot enjoy the protection afforded by s. 170 BEA 1890, due to
crossing being virtually non-existent in Canada and neither are they able to fall
back on the English s. 60 BEA 1882, as Canada did not take this over into its Act.
The only protection Canadian drawee banks thus have against conversion claims in
respect of cheques bearing a forged endorsement is that of a limitation period contained in ss. 48(3) and (4) BEA 1890.
This paper will consider these differences, how they came about, their effect
and the consequences for banks. Initially however, the coming into being of the
Bills of Exchange Act in the UK shall briefly be discussed, as well as how fraud
affects these vastly important instruments.
2. CHEQUES, THE BILLS OF EXCHANGE ACT AND THE

PROBLEM OF FRAUD
The BEA was, as is stated in its long title, intended to codify the law relating
to Bills of Exchange, Cheques and Promissory Notes and was a task that was
carried out by Sir Mackenzie Chalmers, who initially framed the piece of legislation as a digest of the law and [subsequently] published it as a textbook.16 It was,
according to Chalmers, the reception of the work [that] encouraged him to throw
the propositions of the Digest into the form of a [Parliamentary] Bill.17
The chief characteristics of a bill of exchange are its transferability and its
negotiability. Its transferability refers to the ability to transfer the right to sue on the
bill to another party either by mere delivery (for an instrument payable to bearer) or
by delivery and endorsement (for an instrument payable to order).18 Its negotiability refers to the ability of a transferee to take the bill as a holder in due course and
thereby avail himself of the defences contained within the BEA most notably his
15
16
17
18
Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce (1996), 1996 CarswellBC 2314, 1996 CarswellBC 2315, EYB 1996-67134, [1996] S.C.J. No. 111,
[1996] 3 S.C.R. 727, [1997] 2 W.W.R. 153, 140 D.L.R. (4th) 463, 27 B.C.L.R. (3d)
203, 203 N.R. 321, 82 B.C.A.C. 161, 133 W.A.C. 161 (S.C.C.) [Boma].
J.K. Macleod, The plight of the unbanked payee (1997) 113 LQR 133 at 135
[Macleod].
Ibid., at 135.
Section 31 UK BEA and s. 59 Canadian BEA.
51
taking of the instrument free of certain defects in the transferors title.19

Cheques are, in essence, a specialised form of a bill of exchange20 and are
defined, in s. 73 BEA 1882 and s. 165 BEA 1890 in the UK and Canada respectively, as a bill of exchange drawn on a banker payable on demand with it being
further stated that except as otherwise provided in this Part, the Provisions of this
Act applicable to a bill of exchange payable on demand apply to a cheque. This
last sentence has the effect of extending the general provisions relating to bills of
exchange to cheques and, as such, the above two characteristics inherent in all bills
of exchange are thus applicable to cheques. It has however been enunciated by Dr
Miles Holden that it is these two attributes of a cheque which render it unsatisfactory as a safe means of payment21 due to its consequent ability to be an instrument
of fraud. Fox stated that cheques are generally used simply as a means of instruction to transfer funds from the bank account of the payer to the bank account of the
payee with their transferability being in the vast majority of cases, an unwanted
feature exposing both the payer and the payee to the risk of fraud by third
parties.22
Due to the inherent weakness of the present system being the ease with
which a thief can collect the proceeds of cheques that he has stolen and the fact
that a cheque seldom passes from one person to another under modern conditions, Holden proposed a non-transferable mandate23 which would take the form
of a pay only order. Holden espoused certain problems that such an instrument
may cause and hurdles that would need to be overcome.24 Smart, on the other hand,
does not believe that such an instrument would give rise to such problems at all.25
He instead focuses on the almost complete protection for the true owner which
would result from a non-transferable instrument, due to the discouragement of
third party collections, combined with the unqualified liability of bankers making
such collections.26
3. THE TRANSFERABILITY OF CHEQUES AND THE EFFECT OF

THE 1992 ACT
As shall be discussed below, the idea of such a non-transferable instrument
espoused by both Holden and Smart was taken up with the enactment of the Cheques Act 1992, which gave statutory effect to account payee cheque crossing and
thereby made cheques, for all intents and purposes, non-negotiable instruments. It
would however first be prudent to understand the pre-1992 position and therefore
19
20
21
22
23
24
25
26
Sections 29, 38 UK BEA and ss. 55, 73 Canadian BEA.

Macleod, supra, n. 16 at 133.
M. Holden, Suggested Reform of the Law Relating to Cheques (1951) 14 Mod L Rev
33 at 44 [Holden].
J. Fox, Legislative Comment The Cheques Act 1992 (1992) JIBL 280 [Fox].
Holden, supra, n. 21 at 51.
Ibid., at 49.
P.E. Smart, The Law of Cheques The Indorsement Aspect (1951) 14 Mod L Rev
314 at 318 [Smart].
Ibid.
52
[28 B.F.L.R.]
the protection that cheque crossing provided a drawer with under the BEA 1882
prior to the enactment of the 1992 Act.
(a) Cheque Crossing under the BEA: UK

The BEA contains, in both the UK and Canada, provisions that allow for the
crossing of cheques. It is a practice that originated in the eighteenth or early nineteenth century in the context of the procedures of the clearing house and was used
originally as a means of settlement of the accounts at the clearing house with
bank employees (and not the drawers) writing the names of their respective banks
on the back of each cheque27. The crossing of cheques became a practice with
which the drawer concerned himself towards the middle of the nineteenth century.28 The drawer came to utilise the practice as a useful safeguard against loss or
theft so that payment would be made only to the banker named in the crossing.29 Two such crossings were developed over the following decades special
and general crossings with a special crossing being a stipulation on a cheque to
pay to a particular banker and a general crossing being a stipulation to pay to any
banker.
The courts were however hesitant to give full legal effect to this mercantile
practice, as is illustrated by the leading case Bellamy v. Majoribanks,30 in which
Baron Parke stated that crossing the cheque with the name of a banker alone cannot have the effect of restricting its negotiability to the banker alone as to hold it
to have this effect would be to render the instrument no longer a cheque.31 Holden
stated that this robbed special crossings of their usefulness, albeit Parke B did
give general crossings his qualified blessing32 and stated that to ignore a general
crossing (which ensures that a cheque is paid to a banker) would be strong evidence of negligence in an action against him as no prudent banker would pay a
crossed cheque otherwise than to a banker.33 The Crossed Cheques Act 1856, enacted four years later, gave statutory force to this dictum.34 Due to a subsequent
judgment35 which had the effect of completely obliterating this form of protection
for the drawer and, some would say, permitting any holder (perhaps even a wrong-
27
28
29
30
31
32
33
34
35
E.P. Ellinger, E. Lomnicka & R.J.A. Hooley, Ellingers Modern Banking Law, 4th ed.
(Oxford: Oxford University Press, 2006) at 376 [Ellinger].
See Smith v. Union Bank of London (1875), (1875-76) L.R. 1 Q.B.D. 31.
Bellamy v. Marjoribanks (1852), 155 E.R. 999, 7 Ex. 389 [Bellamy].
Ibid., 389 at 400-401.
Bellamy, supra, n. 30 at 403-404.
It stated where a draft on any banker made payable to bearer or to order on demand
bears across its face an addition, in written or stamped letters, of the name of any
banker, or of the words and Company, in full or abbreviated, either of such additions
shall have the force of a direction to the bankers upon whom such draft is made that the
same is to be paid only to or through some banker, and the same shall be payable only
to or through some banker.
Simmonds v. Taylor (1857), 27 LJCP 248.
53
ful holder) . . . [to] alter this mandate at his own whim and fancy,36 this Act was
amended in 1858,37 which declared that a crossing was a material part of the
cheque and made the fraudulent obliteration and alterations of a crossing an
offence.38
The Act also provided a general defence for banks vis-à-vis the collection of
crossed cheques39 and gave statutory recognition to crossings accompanied by the
words not negotiable,40 which was to be considered a mere general crossing41
(meaning it had to be paid to a banker, but had no effect at restricting its payment
to the payee, as one would have expected its effect to have been) and prevented a
subsequent holder from obtaining the status of holder in due course.42 Rather irrationally therefore, the cheque remained transferable and so the Act did not prevent
cheques from being transferred to third parties, which did not reduce the effect of
forged endorsements (as a restriction on the actual transferability of the cheque visa` -vis the payee would have done). It is interesting to note that when the Bill was
being debated in Parliament, a member sought to give statutory recognition to the
crossing account payee, which would have restricted the payment of the cheque
to the named payee (which, as shall be discussed, the Cheques Act 1992 did) but
such a recognition was not taken up, for reasons unknown.43 This was a rather
unfortunate missed opportunity, which could have had far-reaching effects for the
ensuing jurisprudence up until the granting of such statutory recognition over a
century later.
The BEA thus did not recognise the crossing account payee44 but did
recognise general and special crossings and incorporated the defence for collecting
banks from the 1856 Act (as amended by the 1858 Act) which forms s. 82 BEA
1882 (later widened by s. 4(1) Cheques Act 1957, discussed below) as well as a
defence for a paying banker.45 In order to enjoy either defence however the cheque
needed to have been paid in accordance with the crossing and in good faith and
without negligence. Due to the need to show that one had acted without negligence, it was held,46 notwithstanding the non-recognition of account payee cross-
36
37
38
39
40
41
42
43
44
45
46

With the enactment of the Crossed Cheques Act 1858 (UK), 42 & 43 Vict, c 11 (hereafter referred to as Crossed Cheques Act 1858).
See Ellinger, supra, n. 27 at 376: the Act actually made such actions a felony, with
those found guilty liable to be transported beyond the seas for life.
Ibid.
Ibid.
Section 76(2) BEA 1882.
Section 81 BEA 1882.
Nor did the Court of Appeal in National Bank v. Silke, [1891] 1 Q.B. 435 recognise
such a crossing, as it held that a cheque payable to the order of M and crossed Account of M, National Bank did not contain words prohibiting transfer within s. 8 of
the BEA 1882; Importers Co Ltd v. Westminster Bank Ltd, [1927] 2 K.B. 297 also held
to the same effect.
Section 80 BEA 1882.
See Bevan v. National Bank Ltd. (1906), 23 T.L.R. 65.
54
[28 B.F.L.R.]
ing prior to the Cheques Act 1992, that a banker which pays out to a person where
it has information that may lead him to think that the account he is paying into is
not the payees account, would be negligent and he would thus not be able to avail
himself of the s. 80 BEA 1882 defence. In this respect therefore, the crossing of
cheques caused some reallocation of loss away from the dispossessed owner . . .
due to the increase in the standard for bank responsibility for crossed cheques.47
All in all therefore, as one can ascertain from the above discussion, cheque
crossing provided the drawer with some form of protection but courts, as well as
Parliament, were hesitant to restrict the negotiability and transferability of cheques
and only special and general crossings and not account payee crossings were
given statutory recognition in the BEA 1882. The defences provided to the banks in
the BEA were also restricted to crossed cheques, having no applicability in a claim
against a bank in the tort of conversion for having dealt with an uncrossed cheque
and paying out to an illegitimate payee/endorsee.
(b) Pre-1992 Act Discussion

Section 76 BEA 1882 gave statutory effect to general and special crossings,
with the words non-negotiable being recognised, but no other crossings were
given statutory effect. Although some persons may have believed that an account
payee crossing would render a cheque non-transferable, this was held by the
courts not to be so48 with these words not imposing any kind of obligation on the
bank, but rather acting as a direction to the collecting bank to apply the proceeds
of the cheque to the account of the stated payee and not to the account of any other
party unless the collecting bank had satisfied itself that payment to that third party
was in order.49 Such a cheque could thus, prior to the 1992 Act, still be endorsed to
a third party and, provided the collecting bank had satisfied itself by a reasonable
enquiry that the third party was a legitimate endorsee, it could, pursuant to s. 4(1)
Cheques Act 1957 (a defence available to the collecting bank which shall be discussed further below), enjoy protection from liability in conversion to the true
owner of the cheque even if the endorsement had in fact been fraudulent.50 Admittedly, considering a bank must act in good faith and without negligence, the circumstances in which this would be true are extremely limited.51
Albeit cheque crossing is something that has been in existence, and utilised, in
the UK for over a century, its practice was something that had never been encouraged by the banks with the Encyclopaedia of Banking Law stating that customers crossing their cheques in this way may be asked to desist.52 There were
said to be two grounds for such an insistence on the part of the banks. Firstly, any
attempt to render a cheque non-transferable was said to cast doubt on the character-
47
48
49
50
51
52
Benjamin Geva, Bank Collections and Payment Transactions (Oxford: Oxford University Press, 2001) at 431 [Geva].
National Bank v. Silke, [1891] 1 Q.B. 435.
Fox, supra, n. 22 at 280.
Ibid., at 281.
Ibid.
Ibid., at 282.
55
ization of the instrument of a cheque, which this writer feels clearly did not take
into account s. 8(1) BEA 1882, as this provision explicitly allows for the inclusion
of wording on a bill of exchange that expresses an intention that the instrument be
non-transferable.53 The 1992 Act has clearly removed any doubt as to this. Secondly, having regard to the fact that a bank paying a cheque presented to it
through the clearing system will not in any event know for whose account the proceeds of the cheque are eventually credited, it would seem illogical for a paying
bank to concern itself with a purported endorsement of a non-transferable cheque
and wrong in principle to suggest that it might (but for s. 81A(2) BEA 1882) have
been negligent for failing to do so.54 Once again, the 1992 Act has cleared this up
and made it an implicit duty upon the collecting bank to ensure the payee is the one
for whom the cheque is collected.55
Crossings were thus, pre-1992, treated merely as a direction to the collecting
bank as to how the proceeds of the cheque were to be dealt with after receipt and
did not operate so as to restrict the transferability of cheques, which left a loophole for fraud which was already heavily exploited.56
(c) The 1992 Act

The Cheques Act 1992 is said to represent the culmination of decades of debate on the subject of non-transferable cheques,57 which was induced, in part, by a
series of misappropriations of cheques, that had been sent by post to the Inland
Revenue in payment of taxes, leading the Commissioner to suggest that taxpayers
remit amounts due from them by drawing on non-transferable cheques.58 The
Jack Committee, which convened in 1988 and submitted its report in February
1989, had recommended a new non-transferable payment order, alongside that of a
cheque, which could be used in cases where the drawer wished for the order to be
non-transferable. The government however concluded otherwise, feeling that no
new payment instrument was necessary and instead opted to enact legislation that
rendered a cheque non-transferable where it had an account payee crossing.59
Section 1 of the Act60 therefore establishes for the first time that a cheque
which bears on its face the words account payee is non-transferable, which not
only fulfils the drawers expectation that only the named payee should be the per53
54
55
56
57
58
59
60
Ibid.
Ibid.
See Honourable Society of the Middle Temple v. Lloyds Bank Plc, [1999] 1 All E.R.
(Comm) 193, [1999] Lloyds Rep. Bank. 50, [1999] C.L.C. 664, which will be discussed below.
A. Johnson, Stolen Cheques and the Cheques Act 1992: the decision in the Middle
Temple case (1999) 14(4) JIBL 129 [Johnson]: during the Parliamentary debates subsequent to the enactment of the 1992 Act, it was stated that in 1989 there were 19m
worth of cheques that were presented fraudulently, which had risen to 34m by 1990.
E.P. Ellinger, Is there a need for non-transferable cheques (1992) 108 LQR 15 at 15
[Ellinger Article].
Ibid., at 16.
Which is, in effect, the new s. 81A BEA 1882.
56
[28 B.F.L.R.]
son for whom the funds should be available (as observed by the Jack Committee61) but also makes the collecting bank unambiguously liable62 to the named
payee of a cheque if it collects the cheque for any third party who is not so named
on the cheque. The granting of statutory recognition to such a crossing thus has two
effects: firstly, it renders cheques crossed in such a way non-transferable. This, it is
submitted, seems wholly sensible when having regard to the fact that the cheque is
an order to pay from the drawer to its bank; therefore the drawers intention and
indeed expectation (by crossing the cheque account payee) that only the named
payee receives the funds, should be honoured both principally and contractually.63
The Act thus closed the gap between the public perception and legal reality.64
Secondly, the Act implicitly imposes a duty on the collecting bank that the
named payee (and only the named payee) is the person for whom the cheque should
be collected. This was said to be the corollary65 of the first effect of the Act
the non-transferability of the account payee crossing as it is difficult to imagine a situation where a collecting bank could invoke the protection of s. 4(1) of the
Cheques Act 1957 if it collected the cheque for a person other than the named
payee,66 in which case it would most likely not be found to have acted in good faith
and without negligence, as the section requires. This is because it is now conclusive evidence of negligence if the collecting bank [takes], without enquiry, a
cheque marked with the words account payee or account so and so for an account other than that indicated67 and the provisions of the Cheques Act 1992 make
that abundantly clear. It was therefore predicted by Smart that this Act would cause
the collection of third party cheques to virtually cease a relatively short period
of time after the coming into force of the Act and would leave such collection by
banks as a matter for their own business judgment. They would therefore, in effect, collect for third party payees at their peril.68 Banks previously had to balance the risks of collecting on a third party cheque against the possible consequences of refusing to collect upon such a cheque (i.e. the loss of custom),69 which
is no longer a consideration they need to make.
Thirdly, the effect of the Act has been such that cheques are now printed
crossed account payee (at least for non-business accounts) which, as discussed in
Part (e) below, has been its real effect.
61
62
63
64
65
66
67
68
69
Ellinger Article, supra, n. 58 at 15.

See Fox, supra, n. 22 at 281 where the purpose of this as stated in the White Paper is
quoted.
It should be noted however that there is of course no contract between the collecting
bank and drawer, but there is only authority from the drawer to pay the named payee.
Johnson, supra, n. 56 at 130.
John R. Paget & Mark Hapgood, Pagets Law on Banking, 10th ed. (London: LexisNexis Butterworths, 1989) at 454 [Pagets Banking].
Smart, supra, n. 25 at 317.
Ibid.
57
(d) The Problem of International Collection

It is thus crystal clear that a collecting bank has a duty to collect an account
payee crossed cheque for the named payee only or else face liability in the tort of
conversion from the true owner, as it is conclusive evidence of negligence, after the
1992 Act, to collect for a third party who is not the named payee of the cheque.70 A
problem arises however when a cheque is given to a foreign bank which then collects the cheque in the UK through an agent (called an agent for collection), because that agent cannot (as is the case for a domestic collecting bank collecting
domestically) verify that the named payee on the cheque is the one for whom the
cheque is being collected. This problem was one which Rix J (as he then was),
sitting in the UK High Court, had to deal with in Middle Temple.71
The facts of the case, put briefly, were as follows. A cheque, drawn by the
Middle Temple, was intercepted in the post and was cashed in Turkey by a third
party. The true owner, the Middle Temple, initiated proceedings against Lloyds
Bank, which had acted as an agent for collection on behalf of the Turkish bank,
Sekerbank, and against the Turkish collecting bank itself. Here, we shall discuss
Rix Js distinction between a domestic collecting bank collecting for its own customer domestically and a bank acting as an agent for collection for a foreign bank
and leave the question of negligence for the next section, where the defences and
protections afforded to banks shall be discussed. As far as the Cheques Act 1992 is
concerned, the Courts analysis was such that an English bank collecting an English
cheque on behalf of its own customer will almost always be liable if it pays the
proceeds of the cheque to anyone other than the named payee.72 If it collects a
cheque for another domestic financial institution, it is entitled to consider that that
duty [to collect only for the named payee] will be performed by due reliance on its
own customer to have regard for the interests of the true owner.73 If however the
English clearing bank acts as an agent for collection for a foreign bank, the English
bank is not entitled to assume that the foreign bank knows its obligations under
English law and it is thus under a duty to educate its foreign correspondent as to
the terms of the 1992 Act and cannot merely rely on the actions of its correspondent as discharging its obligation to the true owner of an account payee
cheque.74 Put simply, English banks acting as an agent for collection for domestic
entities can assume they know their obligations under English law and can assume
that they will have regard for the interests of the true owner and will thus verify
that the named payee is the person who shall receive the funds. If the person for
whom the English bank is collecting is a foreign bank, then it is to inform that bank
of its obligations under the 1992 Act before it is able to make such an assumption.
Furthermore, it cannot rely on other English banks to inform the foreign bank; it
must do so itself. Only then will the duty to verify that the person for whom the
70
71
72
73
74
Pagets Banking, supra, n. 67.

Honourable Society of the Middle Temple v. Lloyds Bank Plc, [1999] 1 All E.R.
(Comm) 193, [1999] Lloyds Rep. Bank. 50, [1999] C.L.C. 664 [Middle Temple].
Middle Temple, supra, n. 71 at 691.
58
[28 B.F.L.R.]
cheque is being collected is the named payee be passed onto the foreign bank with
no consequences to the English bank.
This judgment seems entirely satisfactory and highly understandable, since the
English bank ought to ensure the foreign bank is aware of its duty under the 1992
Act before it can be said to have fulfilled its obligations under the Act. To have
held otherwise would have, it is submitted, weakened this duty and would have had
rather undesirable consequences. Indeed, Rix J saw this failure to inform the foreign bank of its duty under the 1992 Act as so severe as to hold Lloyds liable on
this ground alone.75 This case has since been approved on these points by Gross J
in the UK High Court in Linklaters v. HSBC Bank Plc.76
(e) The Real Effect of the 1992 Act?

Fox was of the opinion, shortly after the coming into force of the 1992 Act,
that it was a development of limited significance with its real impact likely to be
in its effect on banking practice and the possibility that pre-printed account
payee crossed cheques will become universally available to allow the majority
of drawers to enjoy the increased security which this crossing provides.77 This, it
is submitted, seems somewhat contradictory, since Fox purports initially to say that
the Act is likely to have a limited effect but then have a somewhat fundamental
impact on banking practice with the universal acceptance and widespread printing
of account payee cheques, enhancing the protection of the drawer a great deal
and reducing the problem of cheque fraud significantly. This author thus believes
that this Act has in fact had a much greater impact than Fox believed it would have.
For example, banks are no longer encumbered with the unfounded worry that a
non-transferable cheque is somewhat oxymoronic, as was always shown by s. 8
BEA 1882, which expressly allows for words limiting the negotiability of a bill of
exchange. Albeit the provisions were there that allowed for the restriction of the
transferability of cheques, there were doubts (as illustrated above in both banking
practice and in the courts) as to the ability to restrict this inherent characteristic, so
this Act alleviated those concerns and made cheque crossing the norm, with precrossed printed cheques being available as a matter of course and indeed almost
totally replacing those bearing a non-negotiable crossing.78 Johnson believed this
printing to be absolutely necessary if the Act were to have any positive effect, otherwise the protection of crossing would, as before, be dependent on the drawers
awareness of the advantages of and positive action in crossing the cheque.79 The
problem of fraud has thereby been greatly reduced. Indeed, it was reported in the
press almost a decade after the enactment of the Act that one never hears about
75
76
77
78
79
Middle Temple, supra, n. 71 at 693.

Linklaters v. HSBC Bank Plc, [2003] EWHC 1113 (Comm), [2003] 2 Lloyds Rep. 545
[Linklaters].
Fox, supra, n. 22at 283.
Byles, supra, n. 1 at 1-004 & 21-013.
H. Johnson, Domestic Fraud (1991) 10(5) IBFL 78 at 80 [H. Johnson].
59
cheque fraud anymore.80

Ellinger was another critic of the ability to draw a non-transferable cheque,
since he felt that there was a burden being placed on the banking system without
there being any defences given to the drawer which were significantly more effective than those derived under the law pre-1992.81 For the reasons above, this author does not agree with this view and believes that Ellinger may well choose to
revise this opinion in the light of the success the Act has had in combatting cheque
fraud; indeed Ellinger chose not to raise such an argument in his later writing on
the Act in 2005.82 Ellingers other argument that the non-transferability causes the
drawers interests [to] be deemed more important than those of the payee, who
may often have his own, perfectly legitimate, reasons for wishing to transfer the
cheque83 seems more convincing than his initial argument, but this possible
favouring of the drawers interests seems a small price to pay to combat the thenincreasing problem of cheque fraud and also seems correct in light of the way in
which most cheques were being used not as a negotiable instrument as they once
were, but as an order to the bank to pay the payee the sum requested by the drawer.
Furthermore, it does seem that such a restriction would have a larger impact on the
unbanked payee, since they will not be able to either cash the cheque drawn in their
favour or transfer it to a third party as payment, since the third party will not be
able to sue on the cheque. Cheque cashing companies have evolved in order to
meet this need of unbanked persons to access the proceeds of a cheque drawn in
their favour and this writer submits that although this is not ideal for such persons,
the benefits of reducing cheque fraud considerably outweigh the cons of around 7%
of people84 having to utilise such companies to access these funds.
This effect of restricting the negotiability of a cheque should however be differentiated from the other medium of transferring a cheque, that of contractual assignment under the general principles of law. The difference between the two is
primarily that negotiation can grant a subsequent holder, to whom the cheque is
negotiated, more rights in the instrument than the prior holder had.85 Such a party
which receives these greater rights is known as a holder in due course and has, as
shall be discussed later in this paper, various special defences available to it. The
UK, through enacting the Cheques Act 1992, has however precluded the transferability (both by negotiation and by assignment) of cheques, so long as they are
crossed86 (which, as aforementioned, they almost always are). The collecting bank
thus has an increase in the standard of care imposed upon it, should it seek the
statutory protection of s. 4(1) of the Cheques Act 1957 (discussed below).87 This
80
81
82
83
84
85
86
87
Macroberts Solicitors, Complicated laws reduce risk of cheque fraud The Scotsman
(27
October
2000),
online:
The
Scotsman
online:
<http://business.scotsman.com/6983/Complicated-laws-reduce-risk-of.2240107.jp>.
Ellinger, supra, n. 27 at 380.
Geva, supra, n. 40 at 433.
Ibid.
Ibid., at 434.
60
[28 B.F.L.R.]
distinction, albeit not vital as regards UK law (since both ways of transferring a
crossed cheque are not permitted), is important as regards Australian law for example, since transfer by negotiation is expressly allowed for in its Cheques Act
1986.88 Canada however has no restriction on the transferability of cheques, be it
by negotiation or assignment, since it does not (unlike the UK) utilise the practice
of cheque crossing.
(f) Cheque Crossing in Canada

The UKs BEA 1882 forms the basis, as aforementioned, of Canadas BEA89
and, as such, the provisions concerning cheque crossing (discussed in Part 3(a)
above) were taken over into the Canadian Act in their entirety.90 Due to the use of
cheque crossing in the UK, banks which collected crossed cheques over forged endorsements enjoyed protection under the BEA 1882,91 as long as they acted in
good faith and without negligence.92 The fact that Canada imported these provisions into its Act of 1890 would cause one to assume that banks here would also be
able enjoy this protection when collecting upon crossed cheques. There is however
one slight problem cheque crossing in Canada is almost, if not completely, nonexistent.
Geva states that it is correct to say that these standard BEA provisions93 affording protection to banks collecting or paying crossed cheques are reproduced in
full in Canada94 but due to the fact that cheque crossing is not practised in Canada
these provisions are a dead letter.95 This widespread difference in practice, albeit
the law is fundamentally the same,96 was recognised by the Manitoba Court of
Appeal in the case of No. 10 Management v. Royal Bank.97 It stated that since
crossed cheques are widespread in England, the bankers have gained considerable
immunity with English cases being filled with questions of whether a bank has
been guilty of bad faith or negligence.98 It further said that since crossed cheques
88
89
90
91
92
93
94
95
96
97
98
Cheques Act 1986 (Australia), Act No 145 of 1986, ss. 39 & 40.
Passed in 1890.
H.W. Mickle, Crossed Cheques (1891) 11 Can L Times 209 at 213.
At s. 81 UK BEA.
This protection was expanded to uncrossed cheques by the Cheques Act 1957, but seeing as Canada has not enacted such legislation, the pre-1957 position and protection of
banks only in respect of crossed cheques shall be discussed.
See ss. 173 and 175 BEA 1890 in Canada, corresponding to s. 80 and (the now repealed) s. 82 BEA 1882 in the UK, which provide protection for paying and collecting
banks respectively when dealing with crossed cheques.
Ibid.
As of before the 1957 Act in the UK, where crossed cheques were concerned.
No. 10 Management v. Royal Bank, 1976 CarswellMan 113, 69 D.L.R. (3d) 99 (Man.
C.A.) [No. 10 Management].
Ibid., at 62.
61
are almost unknown in this country, the section99 has had little practical effect.100
Geva101 stated that the United States exerts the largest influence on Canadian
banking practice and seeing as the practice of cheque crossing is unknown in the
United States102 it follows that the practice of cheque crossing is little known in
Canada.103 The Canadian press has indeed referred to the law governing cheque
crossing as a little-known law.104 Even the Canadian Bankers Association rules
state that non-negotiable crossed cheques are to be returned to the payee irrespective of the fact that they may have sufficient funds in their account, citing unfamiliarity of banks with this practice as a reason for such non-acceptance.105 Baxter thus
opines that crossed cheques should be removed from the Bills of Exchange
Act,106 which could seem sensible in one respect but also rather superfluous in
another, considering the fact that the impact would be almost nil. His suggestion
however that such cheques are valid under the law of Canada and should be so
treated by banks and others concerned107 is something with which this writer
agrees. One should not be able to refuse to accept a perfectly valid payment instrument for lack of familiarity. This could prima facie be seen as a breach of contract
between the drawer and its bank if the crossed cheque is to be seen as a valid
demand on the bank to pay the stated amount to the named payee. The incorporation of the aforementioned rules into the bankers contract probably prevents such a
result however.
This unfamiliarity with the practice of cheque crossing renders the passing of
an Act in Canada similar to the Cheques Act 1992 of little effect, as there are no
such crossings to give statutory effect to. The instrument of a cheque thus remains
99
100
101
102
103
104
105
106
107
Section 175 in the Canadian BEA 1890, which corresponds to s. 82 in the UK BEA
1882.
No. 10 Management, supra, n. 97 at 65.
Telephone conversation with Professor Benjamin Geva (15 July 2011) [Geva
Conversation].
Ellinger, supra, n. 27 at 375.
The same could also be said for the practice of certification, which exists in both the
United States and Canada but is unheard of in the United Kingdom.
Vancouver Sun, Before you write a cheque, take note of this little-known law Vancouver
Sun
(15
April
2008)
online:
Canada.com
<http://www.canada.com/vancouversun/news/editorial/story.html?id=3Dc908c47c7f76-470b-bde7-92005261c439>. This article dealt more specifically with payees of a
cheque, who cashed them via a cheque cashing service, knowing that they had been
countermanded by the drawer. The drawers were however liable to the cheque cashing
service, despite the countermand, as the latter had become a holder in due course and
thus took the cheque free of equities. Had the drawers crossed the cheques, they would
have been protected, as the cheque would only have been able to have been cashed by a
bank, credit union or trust company (where the countermand would have been effective). The writer states that such cheques are pre-printed in Europe, where they are
commonly used, but acknowledges that that is not so in Canada.
Ian F.G. Baxter, A Non-Negotiable Crossing (1982-83) 7 Can Bus LJ 141 at 143.
Ibid.
Ibid.
62
[28 B.F.L.R.]
transferable in Canada, albeit the Canadian courts have sought to impose judicially,
if not statutorily, a duty somewhat comparable with the one that arose from the
passing of the 1992 Act. This writer refers to this as Canadas alternative
approach.
(g) Canada: An Alternative Approach

The Supreme Court of Canada in Banque canadienne nationale v. Gingras108
held, in applying the Civil Code of Lower Canada109 (CCLC), that the failure by
a bank to verify a prior endorsement of a cheque which is paid into a third party
account is a breach of the standard required and means the bank has committed a
fault within the meaning of article 1053 CCLC and, since the damage was caused
by this fault, the bank was liable in damages to the true owner. In this case, the City
of Charlesbourg made payments to BD Construction for work it had carried out for
the City and gave cheques in payment of this work to the companys president, Mr
Desjardins. He consequently fraudulently endorsed these cheques and paid them
into his personal account with the Bank Canadian National, who duly collected the
payment. The failure to verify these endorsements was deemed a fault by the
Court, which consequently held the BCN liable to the City for the full amount of
the cheques. The Court applied s. 51 BEA 1890110 in forming this duty on the
collecting bank; the section states that a signature by procuration operates as notice that the agent has but a limited authority to sign, and the principal is bound by
such signature only if the agent in so signing was acting within the actual limits of
his authority. The Court stated that this section had the effect of requiring the
managers of the bank to look into the resolution of the company and ensure the
person endorsing the cheque had the authority to sign the bank thus had a duty,
according to the Court, to verify a prior endorsement.
Duff CJ in Norwich Union Fire Insurance Society Ltd. v. Banque canadienne
nationale111 which was discussed in the above case stated, obiter, that unless the agent possessed such authority, a bank, taking a cheque, marking it paid,
treating it in such a way as to make it appear on its face as a cancelled cheque and
returning it to the drawer would, prima facie, be wrongfully and unlawfully dealing
and interfering with the property of the agents principal; and therefore, would be
committing a fault by positive act within the meaning of article 1053 CCLC
and if damage was caused thereby such conduct might constitute an actionable
wrong under that article.112 In this case however the insurance company retained
108
109
110
111
112
Banque canadienne nationale v. Gingras, 1977 CarswellQue 18, 1977 CarswellQue

341, [1977] 2 S.C.R. 554, 1 B.L.R. 149, (sub nom. Gingras v. Banque Canadienne
Nationale) 15 N.R. 598, 76 D.L.R. (3d) 91 (S.C.C.) [Gingras].
Which was the preceding civil code to the present Civil Code of Quebec, so named as
it was passed shortly after Confederation when the province of Quebec was called
Lower Canada. Even after the province changed its name, the codes name was not
revised until the code was replaced in 1994.
The corresponding provision in the UK Act is s. 25 BEA 1882.
Norwich Union Fire Insurance Society Ltd. v. Banque canadienne nationale, 1934 CarswellQue 45, [1934] S.C.R. 596, [1934] 4 D.L.R. 223 (S.C.C.) [Norwich].
Ibid., at 600.
63
its recourse against the drawer so, since it incurred no loss, the action it brought
could not be maintained.113
The Court also held in Norwich Union that the common law action of conversion could not be invoked in Quebec, due to it having been superseded by a statutory provision article 1053 CCLC which fastens liability on a collecting bank
on the basis of fault114. Such a conclusion was doubted in Gingras by Pigeon J, but
this comment was only obiter and does not seem to have much judicial weight as
far as Quebec jurisprudence is concerned.115 Crawford agrees however with Pigeon
Js conclusion, as he considers it undesirable in an Act of national importance to
have rights determined upon fault in one province and strict liability in all of the
others,116 a statement with which this writer wholeheartedly agrees. This would
have far-reaching consequences for the uniform application of banking law within
Canada, especially in light of the fact that the constitution clearly envisaged uniformity being important in this area of law, thus making it a federal competence. It
is important to bear in mind however that although matters concerning banking and
bills of exchange are federal competences, tort law (under which conversion
comes) is a provincial competence.117 It could thus be argued that the Quebec
courts can apply article 1053 CCLC (and thus the current article 1457 Civil Code
of Quebec (CCQ)), however with the inclusion of s. 9 BEA 1890 in the Canadian
statute, Parliament clearly intended common law principles to apply where cheques
are concerned.
Section 9 BEA 1890 states: The rules of the common law of England, including the law merchant, save in so far as they are inconsistent with the express provisions of this Act, apply to bills, notes and cheques. Due to the fact that in virtually
all provinces and territories comprising Canada (except Quebec) the English common law had been in force at some point in the past, the inclusion of this section
was not a novelty118 and could have (and arguably does have) significant consequence in Quebec. It could thus be said that even though tort law is a provincial
matter bringing into effect the 1457 CCQ, the BEA 1890 (by virtue of s. 9) brings
into Quebec law the common law tort of conversion, as far as cheques are concerned. Another view is that the federal government did not consider Quebecs civil
law nature when drafting this section of the BEA 1890 and thus the Quebec law
should apply; indeed there is a drive to make all federal statutes neutral as regards
common and civil law.119 This writer believes however that in order to attain the
goal of uniformity within this field (which was clearly envisaged by Parliament),
113
114
115
116
117
118
119

Ibid., at 458.
Ibid., at 459.
Bradley Crawford, Crawford and Falconbridge Banks and Bills of Exchange, vol. 2,
8th ed. (Toronto: Canada Law Book, 1986) at 1805 [Crawford & Falconbridge].
Constitution Act 1867, 30 & 31 Vict, c 3. s. 92(13).
Bradley Crawford, Payment, Clearing and Settlement in Canada (Aurora, Ontario:
Canada Law Book, 2002) at 686 [Crawford].
Lionel A. Levert, Harmonization and Dissonance: Language an Law In Canada and
Europe, online: Canada Department of Justice <http://www.justice.gc.ca/eng/deptmin/pub/hfl-hlf/b1-f1/bf1e.html>.
64
[28 B.F.L.R.]
the tort of conversion, being so closely linked to banking and bills of exchange,
would have to apply in Quebec (in relation to cheques), so as to not have the divergent consequence of requiring fault in one province and having strict liability in all
other provinces and territories.
In the particular context of cheques, however, fault does apply in the tort of
conversion in English law, albeit it could be said to be somewhat of an inverse to
the Quebec position. English law grants a defence (as we shall discuss in the chapter below) so long as the bank has not been negligent and has acted in good faith,
requiring therefore a bank to not have been at fault so as to avail itself of the statutory defence against an action in conversion. To that end, fault does form a part of
the action of conversion in the UK, but rather indirectly, when considering whether
a bank may avail itself of a defence under the Cheques Act 1957. This is yet very
different to requiring the presence of fault in order to attach liability to a bank, as
the onus shifts to the person bringing the claim, rather than putting the onus on the
bank to prove it was not at fault and thus able to utilise the statutory defence.
Although this duty could be said only to arise in the province of Quebec, due
to the fact both of the above cases came to this conclusion based upon an article in
the Civil Code of Lower Canada, the Supreme Court of Canada also seems to allude to a quasi-duty, akin to the one imposed in the two cases above, in the case of
Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce.120 It achieved
such a result not by an imposition of a duty per se but by (as discussed below) a
narrowing of the defences available to collecting banks with the net effect being
a requirement of increased vigilance on the part of the collecting bank and therefore a very onerous duty on the collecting bank in relation to all cheques sent for
collection to detect which are fraudulent.121 There is thus an implicit duty on the
banks, as regards the collection of third party cheques, to ensure their validity, because to not do so does not mean they are at fault as under Quebec law, but rather
unable to avail themselves of the defences to an action in conversion (which is very
similar to the English position, as aforementioned).
Indeed Iacobucci J, sitting in the Court in Boma, further stated that the likelihood of fraud was much higher in the case of third party cheques122 with the
result that a collecting bank [is] not permitted to assume that the transaction [is]
genuine in the face of circumstances that [are] so clearly prone to fraud.123 Crawford agrees with such a proposition and states that where a cheque is deposited for
collection is payable to the depositor only by reason of an endorsement of the original payee, questions naturally arise concerning the validity of the endorsement and
120
Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce (1996), 1996 CarswellBC 2314, 1996 CarswellBC 2315, EYB 1996-67134, [1996] S.C.J. No. 111,
[1996] 3 S.C.R. 727, [1997] 2 W.W.R. 153, 140 D.L.R. (4th) 463, 27 B.C.L.R. (3d)
203, 203 N.R. 321, 82 B.C.A.C. 161, 133 W.A.C. 161 (S.C.C.) [Boma].
121 M.H. Ogilvie, Banker and Customer: The Five-Year Review, 19952000 (2001) 16
BFLR 231 at 256.
122 Nicholas Rafferty & Jonnette Watson Hamilton, Is the Collecting Bank Now the Insurer of a Cheques Drawer against Losses Caused by the Fraud of the Drawers Own
Employee? (2005) 20 BFLR 427 at 445 [Rafferty & Hamilton Insurer Article].
123 Boma, supra, n. 120 at para. 79.
65
the authority of the depositor.124
(h) Conclusion
It is clear that after the enactment of the Cheques Act 1992, the nature of cheques has dramatically changed in the UK, since they are now almost always nontransferable, with banks issuing, as a matter of course, account payee crossed
pre-printed cheques to their customers. This has provided a great deal of protection
to the drawer and has taken the idea of crossing, which was used in the UK before
the Act but had its doubters and critics, to a whole different level. Due to the familiarity of banks and their customers with crossing prior to the Act, the giving of
statutory effect to account payee crossings, making them non-transferable, made
sense. In view of the fact that Canada does not utilise this practice at all, it does not
appear that such a granting of statutory effect would have the same result in
Canada.
The duty that flows from this non-transferable nature of the cheque in the UK,
most potently illustrated by Middle Temple,125 is imposed on banks by virtue of
depriving them of a defence under the Cheques Act 1957. It is based on the idea
that collection of a cheque for a third party is conclusive evidence of negligence,
which could be what the Canadian courts are attempting to do as well. This is either
by the imposition of liability on the basis of fault in Quebec, where the bank is
deemed to fall short of the standard required when it does not verify a prior endorsement on a cheque, or by the narrowing of defences available to a bank in the
common law jurisdictions (debatably also in Quebec), thereby requiring greater
vigilance and a quasi-duty to detect forged cheques. The extent to which this duty
exists however is dependent on the nature of the cheque in question (i.e. is it transferable or not), because if it were non-transferable by virtue of a crossing (due to
the 1992 Act), there is a duty on the collecting bank only to collect for the named
payee. As cheque transferability has not been so restricted in Canada, it is difficult
to say exactly what conduct will result in a bank being apportioned with fault
under Quebec law, which is if the Quebec law is of relevance here at all (in view of
s. 9 BEA 1890).
4. DEFENCES & PROTECTIONS

This chapter shall deal with the defences and protection that collecting and
paying banks may raise to an action of conversion. They differ depending on the
status of the bank as collecting or paying bank and, as such, the defences and protections for each type of bank shall be dealt with separately. It would first however seem prudent to briefly state who has standing to make such a claim in conversion against the banks.
(a) Conversion
It is well established that an action in conversion may be brought by the right-
124
125
Crawford, supra, n. 118 at 259.

Middle Temple, supra, n. 71.
66
[28 B.F.L.R.]
ful holder of a cheque against a wrongful dispossessor.126 The Supreme Court of

Canada held in B.M.P. Global Distribution Inc. v. Bank of Nova Scotia127 that a
drawee can successfully seek recourse from the payee of a forged cheque, which
had previously been answered in the negative128 in Canada, but which had already
been held in the English courts to be possible.129 This was something that Ogilvie
stated showed the Supreme Courts affirmation of the importance of honesty
within the banking system and should be welcomed by both banks and customers
because it confirms that dishonesty will not be condoned and that the courts will
unwind, if at all possible, transactions dishonest in their inception.130 In Boma131
the Court unanimously agreed that a drawer, as true owner of a cheque payable to
order, may bring an action in conversion against a collecting bank that collected the
cheque over a forged endorsement.132 It is thus the lawful possessor of [the]
chattel who has the right to pursue the bank in the tort of conversion.133
Finally, Conrad JA stated in 373409 Alberta Ltd. (Receiver of) v. Bank of
Montreal134 that it is first to be assessed whether there had indeed been the tort of
conversion and only if the case had been made out does the issue of whether the
bank would be protected by the provisions of the BEA need to be addressed.135
(b) Common Defences

There are common defences to both the jurisdictions of Canada and the United
126
127
128
129
130
131
132
133
134
135
Crawford & Falconbridge, supra, n. 116 at 1386.

B.M.P. Global Distribution Inc. v. Bank of Nova Scotia, 2009 SCC 15, 2009 CarswellBC 809, 2009 CarswellBC 810, [2009] S.C.J. No. 15, [2009] A.C.S. No. 15,
[2009] 1 S.C.R. 504, 304 D.L.R. (4th) 292, 386 N.R. 296, 94 B.C.L.R. (4th) 1, [2009] 8
W.W.R. 428, 452 W.A.C. 1, 58 B.L.R. (4th) 1, 268 B.C.A.C. 1 (S.C.C.) [BMP Global].
R. v. Bank of Montreal, 1907 CarswellOnt 780, 38 S.C.R. 258 (S.C.C.).
National Westminster Bank Ltd v. Barclays Bank International Ltd (1974), [1975] Q.B.
654, [1975] 2 W.L.R. 12, [1974] 3 All E.R. 834, [1974] 2 Lloyds Rep. 506, 118 S.J.
627.
M.H. Ogilvie, Forged Cheques, Mistake of Fact and Tracing: B.M.P. Global Distribution Inc. v. Bank of Nova Scotia (2009) 25 BFLR 545 at 555 [Ogilvie BMP].
Boma, supra, n. 120.
Benjamin Geva, Conversion of Unissued Cheques and the Fictitious or Non-Existing
Payee: BOMA v. CIBC (1997) 28 Can Bus LJ 177 at 181 [Geva Article].
Crawford & Falconbridge, supra, n. 116 at 1386.
373409 Alberta Ltd. (Receiver of) v. Bank of Montreal, 2001 ABCA 76, 2001
CarswellAlta 397, [2001] A.J. No. 341, (sub nom. 373409 Alberta Ltd. v. Bank of Montreal) 277 A.R. 211, 13 B.L.R. (3d) 165, [2001] 7 W.W.R. 638, 242 W.A.C. 211, 92
Alta. L.R. (3d) 280, 198 D.L.R. (4th) 40 (Alta. C.A.); reversed (2002), 2002 SCC 81,
2002 CarswellAlta 1573, 2002 CarswellAlta 1574, REJB 2002-36137, [2002] S.C.J.
No. 82, [2002] 4 S.C.R. 312, 317 A.R. 349, 8 Alta. L.R. (4th) 199, [2003] 2 W.W.R. 1,
284 W.A.C. 349, [2003] R.R.A. 1, 220 D.L.R. (4th) 193, 296 N.R. 244, 29 B.L.R. (3d)
1 (S.C.C.) [373409 Alberta].
Nicholas Rafferty & Jonette Watson Hamilton, The Liability in Conversion of a Collecting Bank to the Payee: Is an Endorsement Required to Pass Title to a Cheque?
(2002) 17 BFLR 395 at 405.
67
Kingdom which function very much in the same way. It may, for sake of completeness, be useful to briefly mention them here.
(i) Fictitious Payee136

A cheque which is made payable to a fictitious payee is deemed payable to
bearer, which is said to have a terminal effect on the claim for conversion137 as
one cannot have an action in conversion against a party which acquired ownership
legitimately in the converted cheque. The courts have however restrictively interpreted this provision both sides of the Atlantic. In the UK, the House of Lords
stated that if the drawer intended that an existing person whom he designated as
payee should receive the money, such a payee is not a fictitious person within the
meaning of the subsection.138 In Canada, the same approach was taken in the case
of Boma,139 which has recently been followed in the Quebec Court of Appeal.140
(ii) Verification Agreements

The Canadian case of Arrow Transfer Co. v. Royal Bank141 stated that socalled verification agreements which contractually impose a duty on the customer to verify their statements and notify the bank of any discrepancies within,
normally, 30 days or else they shall be contractually barred from claiming against
the bank are a complete defence to a claim in conversion from their customer.
In the UK on the other hand, it has been held in the Privy Council142 that a clear
and unambiguous provision is needed if the banks are to introduce into the contract
a binding obligation upon the customer who does not query his bank statement to
accept the statement as accurately setting out the debit items in the accounts,143
illustrating the stricter approach adopted by the English courts to such imposed
terms. It is however questionable whether such an undertaking would be binding on
a non-business customer, on the ground that it is unfair within the meaning of the
Unfair Terms in Consumer Contracts Regulations 1999.144
136
137
138
139
140
141
142
143
144
To be found in s. 20(5) of the Canadian BEA and s. 7(3) of the UK BEA.

Geva Article, supra, n. 132 at 182.
North & South Wales Bank Ltd v. Macbeth, [1908] A.C. 137.
Boma, supra, n. 120.
124329 Canada inc. v. Banque Nationale du Canada, 2011 QCCA 226, 2011 CarswellQue 1095, EYB 2011-186037, [2011] R.J.Q. 295 (Que. C.A.); reversed 2011
QCCA 226, 2011 CarswellQue 1095, EYB 2011-186037, [2011] R.J.Q. 295 (Que.
C.A.).
Arrow Transfer Co. v. Royal Bank, 1972 CarswellBC 103, 1972 CarswellBC 314,
[1972] S.C.J. No. 64, [1972] S.C.R. 845, 27 D.L.R. (3d) 81, [1972] 4 W.W.R. 70
(S.C.C.).
Tai Hing Cotton Mill Ltd v. Liu Chong Hing Bank Ltd (No.1) (1985), [1986] A.C. 80,
[1985] 3 W.L.R. 317, [1985] 2 All E.R. 947, [1985] 2 Lloyds Rep. 313, [1986] F.L.R.
14, 82 L.S.G. 2995, 135 N.L.J. 680, 129 S.J. 503.
Ibid., at 100.
A.G. Guest, Chalmers and Guest on Bills of Exchange, Cheques and Promissory
Notes, 16th ed. (London: Sweet & Maxwell, 2005) at 3-086 [Chalmers].
68
[28 B.F.L.R.]
It is important to note though that this verification agreement does not apply to
forged endorsements, with time only beginning to run in such a case from the time
from which the account holder has notice of the forged endorsement (i.e. the account holder has 30 days from the time from which he first obtained notice of the
forgery in which to notify the bank of it).
(c) The Collecting Bank

(i) UK: The Cheques Act 1957
(A) Pre-1957
There are two important factors to take into account to understand why the
Cheques Act 1957 was enacted; the first is in relation to endorsements and the second is in relation to the defences afforded to the banks under the original BEA 1882
provisions. It had been the practice of bankers to require as a matter of course the
endorsement of all cheques that were payable to order that were deposited for collection; this was irrespective of whether there had been a previous negotiation by
the payee or not. Such a practice became firmly established due to the emphasis
placed upon the need for a banker to act in the ordinary course of business so as to
avail himself of the defences under the BEA 1882.145 Failure thus to obtain such an
endorsement exposed the collecting bank to the risk of liability if the person who
delivers the cheque for collection has no title, or a defective title, to the instrument.146 Banks had however protested about the expense and inconvenience of
endorsing and examining these cheques in relation to endorsements generally; a
complaint that was borne in mind when the Mocatta Committee on Cheque Endorsement convened in 1955 and was thereby tasked to inquire whether and to
what extent it was desirable to reduce the need for endorsement of order
cheques.147
The BEA 1882 originally provided protection to both collecting and paying
banks who were freed from liability if they had acted in good faith and without
negligence in dealing with a crossed cheque (i.e. the bank had acted in accordance
with its crossing). The protection in ss. 80 & 82 was confined however to crossed
cheques, with banks enjoying no such protection as regards uncrossed cheques.
Drawee banks could however avail themselves of the defence in s. 60 where they
honoured a crossed or uncrossed cheque over a forged endorsement but acted in
good faith and in the ordinary course of business.
(B) The 1957 Act

The principal objective of the Act therefore was to eliminate the necessity for
British banks to examine endorsements while processing about 800 million cheques
145
Ibid., at 17-002.
R. Hooley, Collecting Banks, Conversion and Confusion (1999) 58(2) Cambridge
Law Journal 278 at 278 [Hooley].
147 Chalmers, supra, n. 144 at 17-002.
146
69
each year,148 which the Act achieved not by doing away with endorsements but
instead by seeking to make them pointless.149 Section 4 therefore exempts a
bank from liability to the true owner if, in good faith and without negligence, it
collects an instrument for a customer with defective title thereto and further states,
at s. 4(3), that a banks failure to concern itself with the irregularity in or absence of
the endorsement shall not be considered negligent.150 It is however worth stating
that s. 4(3) does not obviate the need for endorsement when an order cheque is
negotiated151 as the bank is still under an obligation to look at the back of the
cheque to see that there is an endorsement . . . connecting the payee with the holder
and upon which the holders right to the cheque depends.152 The section merely
operates to state that a customer does not need to make an endorsement to the bank
if it is the payee of the cheque. Section 2 provides, in this instance, that a collecting bank shall have the same rights on an unendorsed cheque payable to order as it
would have on one endorsed in blank by the depositing holder.153 As we shall
appreciate in the next section, this seems to have somewhat of a similar effect as s.
165(3) BEA 1890 as regards removing the need for endorsements for mere
deposits.
The Act also extends even further the broad exemptions from liability enjoyed by the banks in their processing of cheques,154 widening the protection they
formerly enjoyed only in relation to crossed cheques also to uncrossed cheques.155
Holden referred to this distinction prior to the 1957 Act as an historical accident,156 with Borrie stating that this Act removed an historical anomaly which
had no real justification.157 In any case, the Act broadened this protection a great
deal, since crossed cheques were not universally available prior to the 1992 Act,
with the protections afforded to banks when collecting on crossed cheques being
reliant upon the actions of the drawer. If Canada were to consider such an amendment, banks would at last be able to avail themselves of the corresponding provisions in the BEA 1890, since protection would not only be granted in the case of
crossed cheques (which we know to be virtually non-existent in Canada), but also
for uncrossed cheques.
Section 4(1) of the Act thus provides a complete defence158 to a collecting
bank against an action by the true owner of the instrument, so long as it can prove
148
149
150
151
152
153
154
155
156
157
158
Harvard Law Review Association, Recent Statute (1958) 71(7) Harvard Law Review
1374 [Harvard Review].
Chalmers, supra, n. 144 at 17-002.
Harvard Review, supra, n. 148.
G. Borrie, Problems of the Collecting Bank (1960) 23 Modern Law Review 16 at 18
[Borrie].
Ibid., at 17.
Harvard Review, supra, n. 148.
Ibid., at 1375.
Thereby repealing s. 82 BEA and amending s. 80 BEA.
Borrie, supra, n. 151 at 17.
Hooley, supra, n. 146 at 278.
70
[28 B.F.L.R.]
that it has acted in good faith and without negligence. Most cases thus turn on the
negligence, or lack thereof, of the collecting bank.159 The burden of proving that
one acted without negligence is a heavy one,160 which is also a question of interpretation for the courts. How then have the courts interpreted the concept of negligence in English law?
Diplock LJ in Marfani & Co. v. Midland Bank161 interpreted negligence in
terms of a breach of duty of care that the bank owes to the true owner of the
cheque, stating that the inquiries that need to be made by the bank depend on the
current banking practices of the day, so that where practice has changed, so too
does the duty owed.162 He framed this duty as the following question: were those
circumstances such as would cause a reasonable banker possessed of such information about his customer as a reasonable banker would possess to suspect that his
customer was not the true owner of the cheque?163
Rix J in Middle Temple,164 the facts of which have been set out above, came
down in favour of the view expressed by Diplock LJ in Marfani by stating that a
collecting bank owes a duty of care to the true owner of the cheque.165 That duty
changes dependent upon whether the bank is a collecting bank for its own customer
or is an agent for collection for another bank, which again differs depending upon
whether that other bank is a domestic or foreign institution (see section Part 3(d)
above). The crucial point that this case illustrates is that, since the Cheques Act
1992 and the fact that cheques are now non-transferable where they are crossed
account payee (which they almost always are), a bank which collects such a
cheque for a person other than the named payee will almost always be held to be
negligent and so fall outside of the section 4 defence.166
In the recent case of Linklaters v. HSBC Bank Plc,167 Gross J applied the test
of whether an ordinary prudent banker in the collecting bankers position should
have been put on inquiry.168 He also took into account the business practicalities of
the banking world, stating that a microscopic examination of the customers account was not required, since this would render banking practice impracticable.169
Banking practice was brought to the fore in Architects of Wine Ltd v. Barclays
159
160
161
162
163
164
165
166
167
168
169
Ibid.
Marfani & Co. v. Midland Bank, [1968] 2 All E.R. 573, [1968] 1 W.L.R. 956 (Eng.
C.A.) [Marfani].
Marfani, supra, n. 161.
Middle Temple, supra, n. 71.
Ibid., at 279.
Linklaters, supra, n. 76.
Chalmers, supra, n. 144 at 17-041.
Ibid.
71
Bank Plc,170 where there were two companies with very similar names Architects of Wine Ltd (AW) and Architects of Wine UK Ltd (AWUK) with AW
being unable to bank in the US or the Cayman Islands (where it was incorporated
and based) due to having been issued with a cease and desist order in the US.
AW thus couriered the cheques to the UK and paid them into AWUKs accounts
with Barclays Bank, which were then duly collected. All of the cheques were payable to AW and not AWUK. The High Court held that the bank was unable to avail
itself of the s. 4 defence since it had fallen well short of establishing any realistic
prospect of success on the issue of negligence.171 Rix LJ however, sitting in the
Court of Appeal, allowed the appeal on the ground that there had been unchallenged evidence before the court of the current banking practice that a sufficient
match was good compliance and the names of these two companies did sufficiently match. The bank was thus able to avail itself of the s. 4 defence, since it had
not been negligent in collecting the cheque for its customer, as its customer had a
similar name to the named payee, which was current banking practice.
All of the above cases basically show that it is rarely safe to assume that
third party cheques are honestly come by,172 as the bank is normally put on inquiry
when it is presented for collection a cheque in relation to which the payee is a third
party.173 Collection therefore of a third party cheque is thus, especially after the
enactment of the 1992 Act, prima facie negligence, thereby preventing the collecting bank from relying on the s. 4 defence. However, as is illustrated by Architects
of Wine above, even after the 1992 Act, the statutory protection for the collecting
bank provided for in the 1957 Act (as well as the paying bank under s. 1(1)) is
preserved, so long as the banks are not negligent and act in good faith, even if the
bank did not collect the cheque for the exact-named payee. Thus, neither the bank
which pays nor the bank which collects a cheque for the wrong Tom Jones will be
liable unless this has occurred as a result of that banks negligence.174
Finally, it should be briefly stated, that the 1992 Act explicitly provides for the
protection for banks to continue under the 1957 Act, which is illustrated by the
inclusion of s. 3 in the 1992 Act which amends s. 4(2)(a) of the 1957 Act to extend
the protection to non-transferable cheques; a creature born out of the later Act. As
noted above, s. 2 of the 1957 Act removes the need for endorsements when depositing a cheque for collection where the named payee is the customer for whom the
proceeds of the cheque are to be collected and this section does so by deeming a
collecting bank a holder for value, despite the absence of this essential endorsement.175 Canada has taken a step further than this however with the introduction of
170
171
172
173
174
175
Architects of Wine Ltd v. Barclays Bank Plc, [2007] EWCA Civ 239, [2007] 2 All E.R.
(Comm) 285, [2007] 2 Lloyds Rep. 471, 151 S.J.L.B. 431, [2007] Bus. L.R. D37 [Architects of Wine].
Allen & Overy LLP, Liability for Conversion of a Cheque (2007)22(6) BJIB & FL
358 at 358.
The contrary of which was espoused by Lord Wright in the case of Lloyds Bank Ltd v.
EB Savory & Co (1932), [1933] A.C. 201, 44 Ll. L. Rep. 231.
D Wheatley, A Wind of Change for Bankers (1992) 142 NLJ 607.
72
[28 B.F.L.R.]
s. 165(3) BEA 1890 by deeming a collecting bank, in certain circumstances, a

holder in due course and thus able to enjoy the rights and privileges that such a
status brings.
(ii) Canada: Section 165(3)

Due to the practice of cheque crossing being seldom used in Canada, if at all,
the protection afforded to collecting banks under s. 175 BEA 1890 has virtually no
significance. This provision has also not been expanded, like it was in the UK with
s. 4(1) of the Cheques Act 1957, to uncrossed cheques, which would of course
render this section of some utility in Canada. The collecting banks thus often look
to s. 165(3) BEA 1890. The provision reads as follows:
Where a cheque is delivered to a bank for deposit to the credit of a person
and the bank credits him with the amount of the cheque, the bank acquires
all the rights and powers of a holder in due course of the cheque.
It should first be borne in mind why this section has such significance. Usually, in order to enjoy the rights and privileges of a holder in due course, the bank
would have to satisfy all of the requirements of s. 56 BEA 1890 but, by virtue of
this section, they can enjoy such a status in certain other circumstances (which enables such a status in a wider context). Having the status of a holder in due course
is significant, as the BEA provides such a holder with great protection, the most
important of which is contained in s. 73(b) BEA 1890, which states that a holder in
due course holds the cheque free from any defect of title of prior parties.
(A) Why was section 165(3) enacted?

The case of Imperial Bank of Canada v. Hays & Earl Ltd.176 raised concern of
the effect of restrictive endorsements on banks when cheques were deposited with
the bank for collection.177 The plaintiff bank had collected the cheque which had
been restrictively endorsed by its customer, crediting the customers account with
the value of the cheque before the cheque had cleared and permitting the customer
to draw on his account. The cheque was not honoured and the bank later realised
that the defendant drawer had a good defence against its customer (the payee) and
also, due to the restrictive endorsement, against the bank.178 There was a similar
such case in Quebec Bank of Nova Scotia v. Budget Motors Ltd.179 which
was also said to be simply a plain application of the terms of the Act.180 In both
cases, it was the restrictive endorsement of the banks customer that prevented the
176
177
178
179
180
Imperial Bank of Canada v. Hays & Earl Ltd., 1962 CarswellAlta 12, 35 D.L.R. (2d)
136, 38 W.W.R. 169 (Alta. T.D.).
Sheilah Martin, Section 165(3) of the Bills of Exchange Act (1985-1986) 11 Can Bus
LJ 23 at 25 [Martin].
Stephen Scott, The Bank is Always Right: Section 165(3) of the Bills of Exchange Act
and its Curious Parliamentary History (1973) 19 McGill LJ 78 at 81 [Scott].
Bank of Nova Scotia v. Budget Motors Ltd. (1965), 1965 CarswellQue 115, [1966]
Que. S.C. 272 (Que. S.C.).
Scott, supra, n. 178 at 81.
73
bank from recovering from the drawers181 and the banks would have been protected had they insisted upon an absolute endorsement at the time of deposit.182
The purpose of the amendment, enacted in 1966, was thus to amend the BEA
1890 so as to put the bank in a position of having recourse against the drawer if
they cannot claim against the payee183 and also to protect a collecting bank in the
absence of an endorsement.184, 185 This was stated by Scott to be of no injustice to
the drawer, since he would be deprived of a defence by operation of law, which he
would also be deprived of if the bank insisted upon an absolute endorsement and
was alert to its own interests.186
(B) The Amendment of 1966

Despite the aforementioned purpose, the result was a section whose wide
wording gave the bank greater powers than those needed to fulfil the amendments
stated policy.187 The first draft of the section for example stated that it applied to
a cheque endorsed for deposit but the enacted law read that it applied to a
cheque delivered to a bank for deposit rendering the bank the holder in due
course of every cheque so delivered and credited, whether endorsed or not.188
The broad scope of this section was illustrated well in Groves-Raffin
Construction Ltd. v. Canadian Imperial Bank of Commerce,189 where the Court of
Appeal of British Columbia held that, upon a plain reading, s. 165(3) was a complete answer to any conversion claim and that the section when passed in 1966
was framed in the broadest terms and was clearly an effort of Parliament to protect
banks from liability for cheques received for deposit to customers accounts.190
Rafferty thus opined that it is difficult to see that [a collecting bank] can ever be
liable to return moneys as having been paid under a mistake of fact,191 with Mar-
181
182
183
184
185
186
187
188
189
190
191
Martin, supra, n. 177 at 25.

Ibid., at 80.
Geva Article, supra, n. 132 at 181.
One no longer needs to endorse a cheque for deposit due to this protection afforded to
the banks, which does away with the physical need for a customer to make such an
endorsement; banks are presumed holders in due course of the cheque if they satisfy
the requirements of the section.
Groves-Raffin Construction Ltd. v. Canadian Imperial Bank of Commerce (1975),
1975 CarswellBC 221, [1975] B.C.J. No. 1173, [1976] 2 W.W.R. 673, (sub nom.
Groves-Raffin Construction Ltd. v. Bank of Nova Scotia) 64 D.L.R. (3d) 78 (B.C.
C.A.).
Nicholas Rafferty, Forged Cheques: A Consideration of the Rights and Obligations of
Banks and their Customers (1979-1980) 4 Can Bus LJ 208 at 232.
Ibid., at 233.
74
[28 B.F.L.R.]
tin opining that this harsh condemnation192 of the section was a result of the
disparity between its intended purpose and its unqualified wording.193
The scope of the section has however since been restricted a good deal by the
Supreme Court of Canada in the case of Boma,194 where it was held that a drawer
as true owner of a cheque payable to order, may bring an action in conversion
against a collecting bank that collected a cheque over a forged endorsement and
thus, it was universally agreed, s. 165(3) of the Act does not provide the collecting
bank with a defence against such an action.195 The Supreme Court thus interpreted persons under the section to include only persons who were entitled to the
cheque, which is what Geva states was what Parliament had intended in enacting
the provision.196 Ogilvie stated that such an interpretation rendered s. 165(3) no
defence to an action by a drawer in conversion against a collecting bank that collected over a forged endorsement,197 which was something that both Geva198 and
Crawford applauded.199
In the case of 373409 Alberta Ltd (Receiver of) v. Bank of Montreal,200 decided after Boma, the Court of Appeal of Alberta stated that it was the absence of
an endorsement alone which was the reason for denying the statutory protection of
s. 165(3). In Titan West Warehouse Club Inc. v. National Bank of Canada,201 the
Court of Appeal of Saskatchewan stated that Boma had restricted the operation of s.
165(3) to the payee or legitimate endorser of the cheque without insisting the bank
obtain an endorsement on such a cheque. Ogilvie states that if Titan is correct, all
Boma requires for a successful defence for a collecting bank under s. 165(3) is
authority to deliver the cheque on the part of the person making the deposit, rendering the interpretation of person as any person who has legal authority to deliver a cheque to the bank.202 If it is indeed the authority to deliver the cheque that
is required, then the Court of Appeal in 373409 Alberta was incorrect in suggesting
that an endorsement is key, with the authority to deliver the cheque being of paramount importance. In that case Ogilvie believes that all that should be required is
the fact that the collecting bank does not doubt the authority of the person making
192
193
194
195
196
197
198
199
200
201
202
With many commentators believing that the provision went too far, such as Scott, Rafferty and Martin herself.
Boma supra, n. 120.
Geva Article, supra, n. 132 at 181-182.
Ibid., at 183.
M. Ogilvie, If Boma is wrong, is the bank always right? 373409 Alberta Ltd. (Receiver of) v. Bank of Montreal (2003) 39 Can Bus LJ 138 [Ogilvie Boma].
Ogilvie Boma, supra, n. 197.
373409 Alberta, supra, n. 134.
Titan West Warehouse Club Inc. v. National Bank of Canada (1997), 1997 CarswellSask 481, [1998] 2 W.W.R. 212, 158 Sask. R. 195, 153 W.A.C. 195, 35 B.L.R. (2d)
322 (Sask. C.A.).
Ogilvie Boma, supra, n. 197 at 145-146.
75
the delivery to be able to claim protection under this section.203 The delivery aspect
(i.e. delivery being made by or under the authority of the party drawing, accepting
or endorsing the cheque within the terms of s. 39(1)) is however something that
was the ratio decidendi in Toronto Dominion Bank v. Dauphin Plains Credit Union
Ltd.204 and which was explicitly overruled in Boma by Iacobucci J.205 Iacobucci J
instead relied upon the general definition of delivery in s. 2 BEA as meaning the
transfer of possession . . . from one person to another, meaning that only the
payee or legitimate endorsee of the payee can qualify as a person under s. 165(3),
with it having nothing to do with delivery as under s. 39(1). It is thus a matter of
regret that the Supreme Court restrained itself when 373409 Alberta was appealed
to it and did not clarify which of the courts of appeals judgments had interpreted
the case of Boma correctly. For now though, the scope of s. 165(3) has most definitely been greatly restricted by a narrow interpretation of person but who that
person needs to be is still somewhat unclear.
Westboro Flooring & Decor Inc. v. Bank of Nova Scotia206 is said however to
validate the fears of some commentators that Boma unduly restricted the protection of collecting banks granted by s. 165(3) of the BEA.207 In this case, the controller of the plaintiff company drew cheques in Westboros name payable to Ottawa Hull Carpet which were purportedly for a regular client of theirs, Terry
Govas Ottawa-Hull Carpet Ltd, whose name was often abbreviated to Ottawa Hull
Carpet so as to fit into the field on the computer software. That company was
dissolved but the cheques continued to be drawn in the same way. The controller
had, in the meantime, registered a business name for himself Ottawa Hull Carpet
Sales and opened an account in that name with CIBC. He then deposited the
cheques into that account, none of which were endorsed, and CIBC duly collected
upon them. Westboro sued CIBC in the tort of conversion and CIBC raised several
defences, s. 165(3) being one of them and the one upon which we shall concentrate.
CIBCs argument however in this regard failed since the Ontario Court of Appeal
held that, as a result of Boma, the payee must be named with precision rather than
reasonable certainty.208 The effect of such an interpretation is that a person for
the purposes of s. 165(3) refers to a person who is in actual fact, and not on outward appearances, entitled to the cheque and its proceeds.209 This seems somewhat harsh, since there can be (as in this case with the abbreviation of the payees
name) legitimate reasons why drawers may omit the last word of a payees name
203
204
205
206
207
208
209
Ibid., at 146.
Toronto Dominion Bank v. Dauphin Plains Credit Union Ltd. (1992), 1992 CarswellMan 158, [1993] 3 W.W.R. 1, 83 Man. R. (2d) 132, 36 W.A.C. 132, 98 D.L.R.
(4th) 736 (Man. C.A.); leave to appeal refused 1993 CarswellMan 477, [1993] 2 S.C.R.
vii, [1993] 4 W.W.R. lxvii (S.C.C.).
Boma, supra, n. 120 at 487.
Westboro Flooring & Decor Inc. v. Bank of Nova Scotia, 2002 CarswellOnt 4536,
[2002] O.J. No. 5091, [2002] O.T.C. 1045 (Ont. S.C.J.); affirmed 2004 CarswellOnt
2350, 71 O.R. (3d) 723, 241 D.L.R. (4th) 257, 187 O.A.C. 357 (Ont. C.A.) [Westboro].
Rafferty & Hamilton Insurer Article, supra, n. 122 at 445.
Ibid., at 441.
Ibid., at 442.
76
[28 B.F.L.R.]
and, as Rafferty, Hamilton and Crawford submit, where a bank accepts a cheque
from a person who is apparently entitled to make such a deposit, it should be protected and where there is no such appearance of entitlement, the bank should not
be protected.210 They believe that a collecting bank should be able to enjoy protection of this section where, to all outward appearances, the person to whom the
money was credited was entitled to that money and there were no suspicious circumstances to cause the bank to think otherwise.211 This writer agrees wholeheartedly with such a statement and is of the strong belief that the loss should be apportioned based on fault (which in this case lay on Westboro). In this way, it is
submitted, some balance could be restored to the interpretation of s. 165(3).212
Aside from this major restriction of the section, there are certain elements of s.
56 BEA 1890, which albeit not expressly required in s. 165(3), have been held to
be necessary for a successful claim of its protection. Scott stated that the requirements of good faith and without notice of any defect in title of the person who
negotiated it may survive against the bank despite s. 165(3) on the ground that
taking such an instrument on reliance on that subsection would be tantamount to a
fraud, if done in circumstances where there was bad faith or notice of defect.213
This seems to give this section somewhat of a UK flair, in that the bank must act in
good faith so as to avail itself of this sections protection, which seems entirely
sensible.
All in all therefore, even though this provision was met with much criticism
when it was first enacted due to its very wide wording and apparent aptness to
abuse by the banks, so that they would have a defence against a claim in conversion
as regards all cheques, the subsequent jurisprudence (especially coming out of the
Supreme Court of Canada) has been instrumental in substantially restricting its
scope. Many commentators now feel that the section has been restricted too much,
so as to render it unusable in many circumstances, especially where the fraud
would more appropriately be borne by the drawer itself (as in Westboro214). The
net result of the jurisprudence is that whenever a cheque has been collected over a
forged endorsement, s. 165(3) provides no protection for the bank, even though it
had no way of knowing that their customer was not a legitimate endorsee or indeed
the legitimate payee, seeing as a payee must now be named with precision and not
just reasonable certainty.
(iii) Section 4(1) Cheques Act 1957 vs. Section 165(3) BEA 1890
It is quite clear from the above analysis that the scope of s. 4(1) Cheques Act
1957 is much broader than its counterpart in s. 165(3) BEA 1890, in that the former
theoretically also applies to forged endorsements, where a bank has acted without
negligence and in good faith. It is also true however that there are similarities be210
Ibid., at 445.
Ibid.
212 Ibid.
213 Scott, supra, n. 178 at 88; also look to Royal Bank v. Hickey, 1978 CarswellAlta 340,
12 A.R. 603 (Alta. Dist. Ct.) and Bank of Montreal v. Banks Marine Industries Ltd.
(1982), 1982 CarswellBC 398, 43 B.C.L.R. 273, [1983] 4 W.W.R. 549 (B.C. C.A.).
214 See Rafferty & Hamilton Insurer Article, supra, n. 122 at 445.
211
77
tween the UK and Canadian approaches. Under English law it is always negligent,
since the enactment of the 1992 Act, to collect a third party cheque, which would
mean a collecting bank would actually not be able to avail itself of the s. 4(1) defence if the endorsement turned out to be forged. In Canada, the approach is such
that, to claim protection under s. 165(3), the person must be a legitimate payee or
endorsee in the first place.
In todays environment however, with unendorsed cheques being deposited
into ATM machines (increased in both the UK and Canada by the removal of the
need for named payees to endorse cheques at all), with there being no contact
between the supposed named payee and a member of a banks staff, is the collecting bank actually in a strong position to ensure the cheque is collected only for the
named payee? It could be that the legislator and courts thought the collecting bank
was in a strong position to do so, since it knows for whom it is collecting the
cheque and can thus confirm that that person is the named payee on the cheque. If,
however, those parties have the same or similar names, but are in fact different,
Canadian and UK law differs as to who bears the liability and thus, crucially, the
loss.
This large difference as regards the collection of cheques for parties with very
similar names is starkly illustrated by a comparison of the result in Architects of
Wine with that of Westboro. In the former case, it was held that due to the fact that
banking practice required a sufficient and not exact match, the bank had not
been negligent and thus could avail itself of the defence in s. 4(1). In Westboro, a
case of similar facts, the bank was held to have not paid out to the exact person,
albeit the practice had always been to omit the last name of the payee, and thus the
bank could not avail itself of the protection of s. 165(3). This interpretation, as is
suggested by other commentators above, has rendered s. 165(3) exceptionally narrow and thus unable to afford banks in Canada with the scope of protection that is
enjoyed by their counterparts in the United Kingdom. In short therefore, the s. 4(1)
defence is available to a collecting bank in all cases where it can show that it acted
without negligence and in good faith, with certain acts being conclusive evidence
of negligence, such as the collection of a third party cheque. Section 165(3) on the
other hand has a more restrictive scope of application, not applying at all to forged
endorsements and not being made available even though the bank was not at fault.
The Canadian courts have taken a harsh approach to banks, which were not negligent and had acted in good faith, yet the exact person named was not the person for
whom the cheque was collected, notwithstanding the fact the bank had no means of
ascertaining this. In that respect therefore, it can said that the UK defence is based
heavily on fault, whereas the Canadian one is not, holding the bank to somewhat
unachievable standards.
There is a thus a complete defence in the UK, pursuant to s. 4(1) of the 1957
Act, for collecting banks where they have collected upon a forged cheque without
negligence. They are also deemed to be holders for value of cheques deposited to
them by the named payee for the purpose of collection (s. 4(3) of the 1957 Act).
Canadian banks however rely on the more general protection of the holder in due
course status, which they are deemed to be in the circumstances espoused by s.
165(3). This defence is not however available as regards forged endorsements,
which is a key distinction. Collecting upon a third party cheque in the UK however
is, with the enactment of the 1992 Act, deemed negligence for the purpose of s.
78
[28 B.F.L.R.]
4(1), with the bank enjoying no defence under this provision should the endorsement turn out to be fraudulent. Should there though be a fraudulent endorsement
but no negligence on the part of the collecting bank, this defence can be enjoyed.
This is not so with s. 165(3) in the Canadian Act.
(d) The Drawee Bank

(i) UK Cheques Act 1957
(A) Pre-1957
Prior to the enactment of s. 1(1) of the Cheques Act 1957, the drawee bank had
to rely on the somewhat overlapping statutory defences afforded to it by ss. 60 and
80 BEA 1882. Section 60 deals with the situation where a person presents a valid
bill or cheque for payment and is claiming title to it through an essential endorsement which has been forged or made without authority. It exempts from liability to
the drawer a drawee bank which, in good faith and in the ordinary course of business, honoured an uncrossed order cheque with a forged endorsement.215 Macleod
stated however that since the purpose of the Cheques Act 1957 is to eliminate so
far as possible the need for endorsements, section 60 is nowadays chiefly likely to
be used by a banker paying cash over the counter for a bill.216 This was said to be
so, due to the self-imposed rules comprising the Committee of London Clearing
Banks (CLCB) agreement that insists on endorsement to afford some evidence
of the identity of the recipient.217
Section 80, on the other hand, extended even greater protection to bankers
who had utilised the practice of crossing, freeing the drawee bank from liability if it
acted in good faith and without negligence.218 The effect of the provision is that
the paying banker cannot be liable to the true owner if payment was in fact collected for somebody else by reason of material alteration of the crossing.219
(B) The 1957 Act

The 1957 Acts purpose was thus to save the paying banker time, by relieving him of the responsibility for examining [cheques] for endorsement by a
payee whose signature is anyway likely to be unknown to the bank.220 Section
1(1) therefore states that where a banker in good faith and in the ordinary course
of business pays a cheque drawn on him which is not indorsed or is irregularly
indorsed, he does not, in doing so, incur any liability by reason only of the absence
of, or irregularity in, indorsement and he is deemed to have paid it in due course.
This defence applies to both crossed and uncrossed cheques, meaning that such a
defence would have somewhat of an application in Canada if enacted there but
crucially requires the endorsement of the person depositing the cheque, since s. 1
215
216
217
218
219
220
Harvard Review, supra, n. 148 at 1375.

Ibid.
Harvard Review, supra, n. 148 at 1375.
Ibid.
79
does not protect the paying bank where the missing or irregular endorsement is
that of someone other than the person who presents it for payment.221 Ellinger
thus states that a drawee bank which does pay the cheque to the wrong party, lays
itself open to an action in conversion to be brought by the named payee the true
owner of the cheque222 and would not be able to utilise the protection of s. 1, or
indeed ss. 60 or 80 BEA 1882, since payment of such a cheque without proper
enquiry can hardly be in the ordinary course of the banks business or made without negligence.223 This is because of the aforementioned agreement of the CLCB
requiring endorsement on such cheques and the need to pay out in the ordinary
course of business.224 Ellinger does state however that it is arguable that the bank
would be able to claim the moneys paid to the collecting bank in restitution due to
the collecting banks potential defence of a change in position.225
(ii) Canada
Canada has, as aforementioned, not taken over s. 60 of the English BEA 1882
and thus does not afford such protection to its drawee banks in the event that they
pay out on an uncrossed cheque which has been fraudulently endorsed, notwithstanding it did so in good faith and in adherence with ordinary banking practice.226
Due to the fact that cheque crossing is virtually unknown in Canada, the protection
afforded to the drawee bank in s. 170 BEA 1890 is also somewhat useless. The
only protection therefore that a drawee bank may use is that of ss. 48(3) and (4)
BEA 1890, where the drawee bank need not reverse the debit to the drawers account and the cheque is to be considered as paid in due course in the event where
the cheque bore a forged endorsement and where the drawer failed to advise [the
drawee bank] of the forgery within one year of acquiring notice.227 This provision
has been held to also be enforceable against the Crown.228
Geva states that there is no parallel provision in other BEA jurisdictions,229
which is most probably due to Canadas somewhat unique position in not utilising
the practice of crossing (thereby rendering those protections unusable) and also not
having imported the s. 60 protection of the UK BEA 1882 into its own Act. It is
also rather interesting to note that this protection is afforded to a drawee bank irrespective of its culpability or negligence which does seem rather odd having noted
the harshness with which collecting banks are treated in Canadian jurisprudence.
221
222
223
224
225
226
227
228
229
Ibid., at 138.
Ibid.
Ibid., at 485.
Bank of Montreal v. Quebec (Attorney General) (1978), 1978 CarswellQue 143, 1978
CarswellQue 143F, [1979] 1 S.C.R. 565, 25 N.R. 330, 96 D.L.R. (3d) 586 (S.C.C.).
Geva, supra, n. 47 at 485-486.
80
[28 B.F.L.R.]
(iii) Conclusion
Section 1(1) of the Cheques Act 1957 affords drawee banks that act in good
faith and in the ordinary course of business with protection should they pay out on
a cheque that bears a forged endorsement, but only if the cheque was endorsed by
the person presenting it for collection. A bank must thus abide by normal banking
practice, which is why this endorsement is required, since the CLCBs agreement
stipulates it as a requirement. The protection of s. 60 BEA 1882 also remains, as
does s. 80 BEA 1882, whose application has been extended to uncrossed cheques
by s. 1 of the 1957 Act.
In Canada however, none of the above apply, with the only protection being a
limitation period of one year from the drawers first obtaining notice of the forgery,
after which he is unable to claim from the drawee bank, as he is statutorily barred
from doing so. A drawee bank which relies on this provision is thus not required to
act in good faith, in the ordinary course of business or without negligence, but
rather on (it should be said) the incompetence of the drawer in not notifying the
bank within a year of having first obtained notice of the forgery perpetrated against
it. This does seem somewhat a bizarre result and also something that is rather
anathema to the English approach, which is based on the virtues of good faith, good
practice and lack of negligent behaviour. After all, are these protections and
defences not there simply to protect those banks which, despite their irreprehensible behaviour and lack of culpability, find themselves subject to an action in conversion from the true owner, who they had virtually no means of ascertaining was
not the person to whom they were honouring the payment?
5. CONCLUSION
It is quite clear therefore that English banks traditionally were able to avail
themselves of more and wider protections against actions in conversion, due to the
fact that they utilised the practice of crossing, thereby rendering the protection afforded to banks dealing with crossed cheques contained within the BEA available
to them. This use of the practice also made the statutory recognition to the account
payee crossing effective and resulted in the universal use of pre-printed and precrossed cheques throughout the UK, enhancing the protection afforded to both the
drawer and the banks who deal with such cheques in good faith, without negligence
and in the ordinary course of business. Such protection was extended to uncrossed
cheques with the enactment of the Cheques Act 1957, along with a decrease in the
need for endorsements as aforementioned.
Canadian banks on the other hand, notwithstanding the fact that the same protections are also contained within the Canadian BEA, are heavily influenced by the
United States and American banking practice.230 As a result, the American laws
non-recognition of cheque crossing and the consequent inexistence of crossed cheques has meant that Canadian banking practice has evolved such that Canadians do
not utilise the practice of cheque crossing and thus Canadian banks are unable to
avail themselves of the protections that such a practice would open to them. The
230
Cheque certification is one other such example of this influence, as this is a practice
that is well-known in the United States but is completely unheard of in the United
Kingdom; see Geva Conversation, supra, n. 101.
81
protections of ss. 170 and 175 BEA 1890 have thus become completely superfluous
and the fact that the English s. 60 BEA 1882 was not taken over into the Canadian
Act has meant that Canadian drawee banks rely on the time limitation contained in
s. 48 BEA 1890 (regardless of culpability) and Canadian collecting banks rely on
(the 1966 provision) s. 165(3) BEA 1890, which grants them holder in due course
status in certain circumstances.
This lack of cheque crossing in Canada would thus render a legislative enactment such as the Cheques Act 1992 completely ineffective, since it would do pretty
much what is the case now with ss. 170 and 175 BEA 1890 absolutely nothing.
The 1992 amendment to the BEA 1882 was only effective due to the more widespread use of cheque crossing in the UK and the consequent reception of the banks
in making such account payee crossed cheques the norm. Had the banks not acted upon this amendment and ensured crossed cheques became universally available, Johnsons warning that such legislative recognition for this crossing would be
ineffective231 could have been accurate; fortunately it was not. It could be that a
different payment instrument, such as that proposed by the Jackson Committee
before the passing of the 1992 Act, could be more apt for Canada, since it would
not be based upon the non-existent practice of cheque crossing, but rather be a
more secure instrument of payment which is non-transferable, thereby curbing the
problem of cheque fraud. There has been a judicial attempt at imposing a duty on
collecting banks in Canada not to collect third party cheques by either deeming
such action a fault (as was held so in Quebec) or by narrowing the protection of
s. 165(3) so as to not include banks that make such collections, but it seems clear
that this does not obviate the need to make the proposed legislative change, as this
approach is very uncertain, is not terribly uniform and it allows for different approaches in different provinces, which is inappropriate in relation to a federal Act.
Banking and bills of exchange are federal competences, which can be seen as a
strong indication that uniformity was intended; indeed uniformity is vital in this
area of law, with legislative action being necessary to accomplish this once again.
Protection in the UK is no longer restricted to crossed cheques, with the passing of the Cheques Act 1957, which expanded the scope of protection to include
uncrossed cheques. Such an expansion would be of use in Canada and would mean
that the sections that grant protection to banks collecting or honouring crossed cheques would now be able to be used by Canadian banks dealing with uncrossed
cheques. With the very restrictive nature of s. 165(3), as discussed above, it is submitted that an expansion of the protection given to banks is necessary, since the
current protection given to collecting banks has become so restrictive as to expect
what is in effect the unexpectable (as clearly shown in Westboro), with the consequence that banks which were not negligent, did not collect in bad faith and had
no means of ascertaining that it was not collecting for the exact named payee, are
not protected. This writer agrees with Rafferty, Crawford and Hamilton232 that a
bank should be able to avail itself of protection against an action of conversion in
the event that it was not negligent and had acted in good faith; an amendment such
as the Cheques Act 1957 would enable this by allowing collecting banks to avail
231
232
H. Johnson, supra, n. 79 at 80.

Rafferty & Hamilton Insurer Article, supra, n. 122 at 445.
82
[28 B.F.L.R.]
themselves of s. 175 BEA 1890, which until now has been unavailable. This writer
also feels that the Supreme Court of Canada should clarify (indeed it should have
clarified) its restriction on s. 165(3) which it instigated in Boma, in light of the
confusion espoused in the subsequent jurisprudence in the provincial courts as to
the interpretation of that case, as uncertainty in this area of law can potentially have
undesirable consequences.
The protection of drawee banks is somewhat different in Canada, since it is
merely based on a drawers lack of notifying the bank within a year of having
acquired notice of the forgery upon the cheque that it drew on the drawee. There is
no element of fault and this could end up giving a drawee bank, acting negligently
and/or in bad faith, a defence, where the BEA in the UK would not permit such
protection, aside from the fact that such protection would be unwarranted and undeserved. The fact that Canada did not include the English s. 60 in its BEA 1890 has
meant that this limitation period defence is the only defence available to drawee
banks which, if an action is brought within a year of notice of the forgery, renders
the drawee bank unprotected, even if it was not acting in bad faith and had
honoured the cheque in the ordinary course of business (in which case it would
have been protected in the UK under s. 60 BEA 1882). Both Australia and South
Africa have followed the UK on this point233 and it is submitted that Canada
should also amend its BEA 1890 to include this provision as well. There does not
seem to be any valid reason why Canada did not include this protection in the first
place. Indeed to allow a drawee bank to be held liable where it was neither acting in
bad faith nor acting outside of ordinary banking practice, yet prevent it from being
held liable merely due to the passing of one year after the drawers notice of the
forgery, seems contrary to common sense and fairness.
The UK had recently proposed the abolition of cheques altogether from
2018234 due largely to the ever-decreasing use of cheques235 and the rise of other
payment methods such as credit and debit cards, but one cannot say that fraud was
not also a consideration in this proposal. The abolition of cheques altogether would
not just have reduced the handling costs and banks charges that come with the
clearing and settlement process, but would of course rendered cheque fraud nil, as
there would no longer be such instruments to forge. This proposal has however,
following a public consultation, been retracted, with the Payments Council stating
that the cheque is staying and that they shall continue to exist for as long as
customers need them.236 Payment by cheque in the United Kingdom in 2007 was
7.2bn whilst cheque use in Canada totalled $144bn237 (93.2bn) in 2009, which is
233

UK Payments Council, supra, n. 14.
235 In 2007, payment with debit and credit cards totalled 170bn, whereas payment by
cheque totalled a mere 7.4bn; Card Technology Today, Cheques in decline in UK
says APACS (2008) May Card Technology Today 1 at 4.
236 UK Payments Council Retraction, supra, n. 14.
237 Luann Lasalle, Dont write off cheques, financial experts say Globe and Mail (28
March 2011) online: <http://www.theglobeandmail.com/globe-investor/personal- finance/household-finances/dont-write-off-cheques-financial-experts-say/
article1959510/>.
234
83
expected to decline to $113bn (73.2bn) in 2014 which is still 10 times the 2007
UK total. With this in mind and the fact that even the UK has now backtracked on
its proposal to do away with cheques, it does seem that such a proposal to abolish
cheques in Canada, it having much larger consequences than those in the UK
(where cheques account for a very small amount of consumer spending) is highly
unlikely. Cheques are thus here to stay in Canada, as they are in the UK, for the
foreseeable future. The problem of fraudulent endorsements therefore will continue, with action countering such activity being ever important.
All in all therefore, it is proposed that Canada look into the adoption of a nontransferable instrument as an alternative to the giving of statutory effect to account
payee crossing, since the latter would be of no effect in a country unaccustomed to
the practice of crossing cheques. Canada should also expand the protection it affords to both collecting and paying banks, making such protection available on the
basis of fault and not apt to produce the anomalous and unfair results as have been
alluded to above.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

Out PDF

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Out PDF

Загружено:

Авторское право:

Доступные форматы

Cheques and Cheque Legislation in the UK and

Canada: Separate Paths in the Past,

Les caracteristiques de leffet de paiement que constitue un ch`eque ainsi que

BANKING & FINANCE LAW REVIEW

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

(a) The Differences

Cheques Act 1957 (UK), c 36 (hereafter referred to Cheques Act 1957).

BANKING & FINANCE LAW REVIEW

2. CHEQUES, THE BILLS OF EXCHANGE ACT AND THE

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

taking of the instrument free of certain defects in the transferors title.19

3. THE TRANSFERABILITY OF CHEQUES AND THE EFFECT OF

Sections 29, 38 UK BEA and ss. 55, 73 Canadian BEA.

BANKING & FINANCE LAW REVIEW

(a) Cheque Crossing under the BEA: UK

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

Holden, supra, n. 21 at 37.

BANKING & FINANCE LAW REVIEW

(b) Pre-1992 Act Discussion

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

(c) The 1992 Act

BANKING & FINANCE LAW REVIEW

Ellinger Article, supra, n. 58 at 15.

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

(d) The Problem of International Collection

Pagets Banking, supra, n. 67.

BANKING & FINANCE LAW REVIEW

(e) The Real Effect of the 1992 Act?

Middle Temple, supra, n. 71 at 693.

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

cheque fraud anymore.80

BANKING & FINANCE LAW REVIEW

(f) Cheque Crossing in Canada

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

BANKING & FINANCE LAW REVIEW

(g) Canada: An Alternative Approach

Banque canadienne nationale v. Gingras, 1977 CarswellQue 18, 1977 CarswellQue

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

Geva, supra, n. 47 at 457.

BANKING & FINANCE LAW REVIEW

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

the authority of the depositor.124

4. DEFENCES & PROTECTIONS

Crawford, supra, n. 118 at 259.

BANKING & FINANCE LAW REVIEW

ful holder of a cheque against a wrongful dispossessor.126 The Supreme Court of

(b) Common Defences

Crawford & Falconbridge, supra, n. 116 at 1386.

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

(i) Fictitious Payee136

(ii) Verification Agreements

To be found in s. 20(5) of the Canadian BEA and s. 7(3) of the UK BEA.

BANKING & FINANCE LAW REVIEW

(c) The Collecting Bank

(B) The 1957 Act

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

BANKING & FINANCE LAW REVIEW

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA

BANKING & FINANCE LAW REVIEW

s. 165(3) BEA 1890 by deeming a collecting bank, in certain circumstances, a

(ii) Canada: Section 165(3)

(A) Why was section 165(3) enacted?

CHEQUES & CHEQUE LEGISLATION IN U.K. & CANADA