This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 146.— A cheque is lost in transmission between a bank in Montreal and one in Toronto. The drawer refuses to give a duplicate unless the bank in Montreal gives a bond of indemnity. Is the latter obliged to do this? Would not the drawer be relieved of liability by stopping payment of the cheque ?
If the cheque had been certified by the bank on which it is drawn, what would be the right procedure?
Answer.—Under section 68, Bills of Exchange Act, the drawer on giving a duplicate is entitled to suitable indemnity, and the Bank in Montreal must furnish it to his satisfaction, or, if they cannot agree, to the satisfaction of the court. The stopping of such payment does not relieve the drawer from liability, inasmuch as the cheque might be negotiated and in the hands of third parties, who would, if the cheque were dishonoured, have a valid claim on the drawer.
If the lost cheque has been certified, the rights of the bank on which it has been drawn have to be considered. Its strict rights depend on the nature of the certification. If this amounts to an acceptance it is entitled to be fully indemnified, and in any case the practical course is to include both the drawer and the bank in the indemnity furnished.