This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 335.— In your answer to Question 338 you say: " A bank can refuse to pay a cheque to order until the bank is satisfied as to the identity of the endorser."
A cheque is presented at the bank; the payee, who is unknown to the bank, requests the bank to accept the cheque pending his identification. This is refused, though there are sufficient at credit of drawer, and by the time payee is properly identified the funds are withdrawn, and payment of the cheque refused.
Can the holder sue the bank for damages?
Answer.—Inasmuch as the bank, before accepting the cheque, is not in privity with the payee, no liability to the holder would arise under the circumstances disclosed in the first question. We think, however, that notwithstanding the disadvantages occasioned by the bank becoming the acceptor of a cheque, referred to in the answer to Question 338, the bank should in fairness mark the cheque under the circumstances indicated in the above question, so as to protect the payee's interests during the necessary delay involved in the identification.