“PAY CASH OR ORDER”

Evening Star, Issue 22249, 29 January 1936, Page 18

“PAY CASH OR ORDER”

A CHEQUE NOT A CHEQUE A cheque is defined in the Bills of Exchange Act as a bill of exchange drawn on a banker payable on demand; a hill of exchange is defined as an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the iterson to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or to bearer. From these definitions it would appear that a cheque is an unconditional order in writing drawn on a banker requiring him to pay on demand a sum certain in money or to the order of a specified person or hearer. Is then a document drawn on a hanker directing him to “ pay cash or order” a cheque? That point was decided recently in the Court of King’s Bench, London, by Mr Justice Branson, who declared that a document so directed to a banker was not a cheque. The case was that of the North and South Insurance Corporation Limited versus tho National Provincial Bank Limited. The insurance company had arranged with a debenture company that the latter company should Help to raise capital for the insurance company, and should receive remuneration for so doing. As part of the arrangement certain directors of the debenture corporation joined the board of the plaintiff company. Subsequently the directors of the plaintiff company decided to pay the debenture company £250 out of funds in an account kept at the National Provincial Bank. It was from this payment that the litigation arose. Tho payment was made by a document, which was drawn in the form of a cheque on an ordinary cheque form, but instead of containing the name of a specified payee, it directed the National Provincial Bank, on which it was drawn, “to pay cash or order.” The document was not crossed, and it was Handed to a Mr Black, who paid it into his own account at Lloyd’s Bank without endorsing it. In due course the socalled cheque was cleared and Lloyd’s Bank collected the amount for Mr Black’s account from the National Provincial Bank. In the present action the plaintiff company, _ which had drawn the document, claimed to be repaid the amount by the National Provincial Bank on the ground that the bank ought never to have paid the amount of the document at all without endorsement. “ BEARER ” OR “ ORDER.” Various contentions W’ere raised on both sides; but the main contention of the plaintiffs was that the document was an order cheque, and, as everyone knows, a cheque payable to order cannot be negotiated without endorsement. On the other hand, a bearer cheque needs no endorsement; and tlie National Provincial Bask contended that this -was, in effect, a bearers cheque. They based the contention on section 7, sub-section 3, of the English Act, which provides, in effect, that where a cheque purports to be payable to “ a fictitious or non-existing person,” it may be treated as payable to bearer. They .argued, in substance, that, since tlie document said. “ pay cash,” the payee was,. as a person, non-existing. The contentions on both sides, writes a legal correspondent in the ‘ Manchester Guardian _ Commercial,’ produced some interesting discussion. In favour of the plaintiffs’ contention that the document was an order cheque there was cited a case decided in 1893. In that case a bill of exchange in the form, “ Pay order,” and without any other words inserted between the two quoted, was held to be a good order bill and equivalent to “Pay to my order”; and it was suggested in the present case that the document was equivalent to a direction to “ pay cash to my order.” That ingenious argument. His Lordship refused to accept. He pointed out that in the 1893 case the document in question did not contain the word “ or,” whereas the document in tho present case did. That, he felt, made all tho difference because the plaintiffs’ suggestion did amount, in effect, to a suggestion that that word should be ignored altogether. The document, he held, was not an order cheque. Equally definite, however, was he in repudiating the bank’s contention that the document was a bearer cheque as being made payable to “a fictitious or non-existing person.” On that point, tho legal correspondent continues, Mr Justice Branson, had ample authority to help him, and he cited it to good purpose as showing that “ a fictitious or non-existing person ” must be something which, if it really existed, would be a “person,” whereas “cash” was an impersonal thing. A DIRECTION TO PAY. The document, therefore, was neither an order cheque nor a bearer cheque. Then what was it? Mr Justice Branson said that it was not a cheque at all. He pointed out that a cheque is defined as a bill of exchange drawn on a banker, and the statutory definition of a bill of exchange says tliat it is an unconditoinal order in writing to pay “ to or to the order of a specified person or to bearer.” But, he argued, “ cash ” is not a payee, and, therefore, the document was not drawn to pay any person at all. Nevertheless, ho absolved the bank from liability, on the ground that the document can only be construed as a direction to pay cash to some impersonal account. Since that mandate had been given by the customer to the bank and the bank had complied with it, the customer had no cause of complaint. “It is a most interesting case, and deals judicially for the first time,’ the legal correspondent of the ‘ Manchester Guardian Commercial ’ states, “ with a point which hitherto has been debated only in the abstract by the text writers. ■ For that reason I should like to see the case carried further through. I must admit that neither on grounds of law nor on grounds of commercial convenience can I see any reason to criticise the decision. Incidentally, the case leaves one interesting point still undecided. At one tune documents of this kind were fairly common, and it was the practice, not as yet wholly discontinued, to draw so-called cheques to “wages or order, or in similar terms. The Council of the Institute of Bankers has deprecated the present case decides is that, in the absence of such matters as negligence, hankers may safely pay such documents. But an interesting point might arise if a banker refused to pay them.”