ROTARIANS LEARN ABOUT CHEQUES

Manawatu Times, Volume LIV, Issue 6857, 12 March 1929, Page 3

ROTARIANS LEARN ABOUT CHEQUES

Mr A. E. Sandford Speaks Mr. A. E. Sandford, manager of the Union Bank of Australia, Feilding,_ entertained Palmerston North Botarians at their weekly lunch yesterday with an address on cheques. Mr. J. Wallace presided. A Form of Credit.

The speaker stated that cheques were a form of credit without which our modern civilisation could not carry on. A business man had a superficial knowledge of cheques, but a banker had so many dealings with 'them that he saw more than was generally realised. They had all heard of sermons in stones, but the speaker was sure that there were far more sermons in a hundred cheques than in a million stones. It, was no use telling the bank manager that one did not go to races when the racing stamp could be seen on the back of the cheque. Cheques, too, told stories of dissipated inheritances or unsuccessful ventures, where, perhaps, a life’s savings might bo lost. Cheques in their simplest form were fairly old. In 1677 there were 37 goldsmiths in London who issued a form of credit notes thht were passed from hand to hand. These more resembled bank notes than cheques. In 1681 a certain man named Childs inherited one of these goldsmith’s shops and .he kept his ledgers on almost the same principle as the banks to-day. That was the origin of our present banking system. In 1770 the house of Childs issued its first cheque, and a hundred years ago the first passage or passbook was originated by them, showing the passage in and out of the cheques. In 1820 legislation was put on the statute book giving joint stock banks a proper standing, but they could not, of course, issue bank tones. By 1921 tho date seemed rather late —there was not a country bank in England or AVales that did not issue cheques. The word “cheque” was derived from the term “exchequer payment.” In time tho word “exchequer” had come to bo used, alone and this had become shortened. A cheque was an unconditional order in writing instructing a banker to pay a certain sum in money on demand to bearer or order.

Requisites as to endorsement. When a cheque was payable to order an endorsement became necessary. An endorsement had to be rogular. If a cheque were made payable to “John Jones,” “J. Jones” would not be a sufficient endorsement. But if a cheque were payable to “J. Jones” and endorsed “John Jones” that would be a correct endorsement. Cheques to a large degree had the quality of negotiability and were frequently passed from hand to hand. A negotiable instrument was one to which the title passed by delivery and the bona fide holder who took without notice of defect in title was not prejudiced by any such defect. Banks were not liable on a forged endorsement and consequently were able to pay many cheques not quite perfectly endorsed, especially in the case of companies or firms where various officials might endorse. The drawer of a cheque gave the banker authority to pay the amount stated therein if the funds were available or if an overdraft had been arranged for. A crossed cheque had to bo paid through a bank. There were two kinds of crossings—general and special. A generally crossed cheque had to be paid through a bank and that was tho only stipulation, but a specially crossed cheque had to be paid into the particular account named in the special endorsement. The words “account payee” really meant nothing legally, so far as special endorsement was concerned, but banks usually endeavoured to protect such cheques.

Duties of Drawer. The first duty of the drawer of a cheque was to see that the amount stated in words and figures agreed. If they differed a banker had a perfect right to take the words as correct, but 'if the discrepancy were large the bank would refer the matter to the customer. In the middle of last century a trader named Young left homo for a few days, giving his wife authority to sign cheques. His secretary filled in a form for fifty-two pounds two shillings and threepence, but left a space in the form. After Mrs. Young had signed tho cheque the secretary, Wooser, dishonestly, put the words “three hundred "and” before “ fifty,” making the cheque £350. The cheque was paid and Young sued the bank, which was field not liable owing to negligence on tho part of tho drawer or his agent, his wife. In 1918 a somewhat similar case had occurred and a lawsuit resulted, McMillan v. London Joint Stock Bank. The High Court and Court of Appeal decided in McMillan’s favour, but the House of Lords, where tfie casev was taken on appeal by the bank, decided in the latter’s favour, holding it not liable.

Duties of Banker. Before paying a cheque tho banker had to see -that the funds were there, that it. was properly drawn and that the signature was correct. Other matters to be considered were that tho customer might have died since drawing the cheque, or have committed an act Of bankruptcy or had a garnishee order issued against his estate. All these were matters of risk, but the banker had to take them. Naturally no banker received a chequo except in good faith, but a question of negligence sometimes arose. The onus lay on banks to see that they were not negligent. If they acted without negligence, they received a certain degree of protection under the Bills of Exchange Act. On the motion of Rotarian A. Grigor the club’s thanks were extended to the speaker for his instructive address.