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124

BANKING

that a person taking a cheque so crossed takes it subject to all equities affecting it, and can neither acquire nor pass on a better right either to the cheque itself or the money realized by means of it than the person from whom he took the cheque. But so long as there is nothing wrong with the cheque or the circumstances attending its issue or transfer, it may pass through any number of hands, and be enforced by the holder for the time being. See the judgment of Vaughan Williams, L.J., in Great Western Railway v. The London and County Bank, 1900, 2 Q. B. 464, and of the House of Lords in the same case. The addition of these words to the crossing in no way prejudices the protection afforded under the crossed cheques sections of the Bills of Exchange Act, 1882, to the paying banker, on whom the crossing only imposes the duty of seeing that the cheque reaches him through the proper channel. A practice has grown up of adding to the crossing of a cheque the words “account payee,” or similar words indicating an intention that the cheque shall be placed to some particular account. There is no statutory sanction for such an addition, and its effect is somewhat doubtful. It was decided in National Bank v. Silke, 1891, 1 Q. B. 435, that the addition of such words did not prevent the cheque being transferable. Nor can such words have the statutory effect attributed to the words “ not negotiable ” by sec. 81 of the Bills of Exchange Act, 1882. Probably the only effect of such crossings as “account payee” is one analogous to that of an ordinary crossing before the legislature intervened, or now of an indorsement being per pro., namely, to impose a greater degree of caution upon the banker who receives a cheque so crossed for an account other than the one indicated; but the point has still to be definitely decided. The protection of the banker against forged indorsements under sec. 60 of the Bills of Exchange Act, 1882, only to bills or cheques payable to Forgeries. extending oii (jeman(jj the banker is not discharged in other cases by payment on a forged indorsement, unless circumstances exist to take the case out of the general rule. Such circumstances existed in the well-known case of Vagliano v. The Bank of England, 1891, A. C. 107. In that case, by the fraud of the plaintiff’s clerk, a genuine acceptance of the plaintiff’s was obtained to documents in the form of bills to which the drawer’s name was forged, and to which the name of the payees to whose order they were drawn was subsequently forged as indorsers. The names utilized as those of drawer and payee were the names of persons having business transactions with the plaintiff Vagliano, and their names were selected as giving colour to the fraud. All the bills were accepted payable at the Bank of England where Vagliano had a large account. Their coming forward for payment was notified to the bank by letters of advice, which referred also to genuine bills, Vagliano’s signature to the letters being fraudulently obtained. The fabricated bills were presented to the bank for payment by or on behalf of the fraudulent clerk, and paid by the bank over the counter. There were forty-three of such bills, and the amount realized by the clerk was £71,500, with which, on discovery of the frauds and conviction of the clerk, Vagliano refused to be debited. The House of Lords, by a majority, ultimately decided in favour of the bank. The main grounds of the judgment were as follows: That whether the documents could properly be termed bills or not, they must be treated as such as against Vagliano who had accredited them as such, and whose case against the bank was based on their possessing that character; that, inasmuch as the persons whose names appeared as payees and indorsers, though really existing people known to Vagliano, were

[legal

never intended to have and never could have had anything to do with the bills, the bills came within the provisions of sec. 7, subs. 3 of the Bills of Exchange Act, 1882, which enacts that “ Where the payee of a bill is a fictitious or non-existent person, the bill may be treated as payable to bearer ”; that whatever may have been the law prior to the Bills of Exchange Act, it was not necessary for the operation of this subsection that the fictitious or nonexistent character of the payee should be within the knowledge of the acceptor or other person sought to be made liable; that it was open to any one whose interest it was to do so to treat the bills as payable to bearer, that the bank was entitled to do so, and was therefore discharged; that apart from these considerations, the bank were agents for Vagliano in the payment of bills accepted payable there, that Vagliano’s own act in accepting the bills and signing the letters of advice, and his omission to take any steps to verify the supposed transactions when circumstances occurred which might have aroused suspicion, were the direct cause of the bank’s making the payments on his behalf, and that he was therefore not entitled to repudiate them. It was incidentally decided in this important case that a banker is not entitled to a reasonable time in which to make inquiries and satisfy himself as to the genuineness of the indorsements on a bill, but must pay or refuse payment at once. Prior to this date the contrary opinion had prevailed, founded on a dictum of Maule, J., in Roharts v. Tucker, 16 Q. B. 560; and when once the payment has been made, the banker, on discovery of the forgery, would appear to have no power, as against an innocent party, to retract it or claim repayment of the money. Such a payment has no doubt been made under a mistake of fact, and so under ordinary rules of law would be recoverable, but it is essential for the free circulation of negotiable instruments that their payment or dishonour should be conclusive as well as immediate, and if in the interval between payment and the claim for the return of the money the payee’s position might have been altered, as would almost invariably be the case, the money is not recoverable {London and River Plate Bank v. The Bank of Liverpool, 1896, 1 Q. B. 7). This somewhat rigorous rule has been modified in Canada. By an Act of the Canadian Legislature passed in 1897, if a bill bearing a forged or unauthorized indorsement is paid in good faith and in the ordinary course of business by or on behalf of the drawee or acceptor, the money may be recovered from the person to whom it was paid or from any indorser who has indorsed the bill subsequently to the forged or unauthorized indorsement, provided notice be given in the same manner as notice of dishonour. It was the more imperative on Canada to take this step because bankers there have no such protection in case of payment of bills payable on demand or cheques on a forged or unauthorized indorsement as is afforded in England by sec. 60 of the Bills of Exchange Act, 1882. Another class of forgery to which bankers are more or less exposed is where the amount of a cheque is fraudulently altered, and the banker is thereby induced to pay the larger sum. In such cases the question arises whether he is entitled to debit the customer’s account with the increased amount. In Young v. Grote, 4 Bing. 253, a man left signed blank cheques with his wife to be filled up as business required. The wife delivered one to a clerk with instructions to fill it up for a particular sum. He filled it up for that sum, but purposely left spaces to allow of the introduction of other words and figures. He showed it to the wife in this state, who told him to get it cashed; the clerk then added words and figures, raising the apparent amount by £300, which the