This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 338.— A cheque drawn to order is presented for payment by an individual unknown to the officials of the bank. He claims to be the payee. Is the bank entitled to delay paying the cheque while it takes diligent steps to satisfy itself as to the identity of the payee ?
Answer.—We think the bank is so entitled. Unless the cheque has been accepted by the bank, and a liability thereby incurred towards the payee, the bank by refusing absolutely to cash the cheque would not be responsible to anyone but the drawer; a fortiori it would not be responsible to the payee by merely delaying payment. The drawer's direction to the bank in the cheque is to pay to a particular person, or to his order. Unless the drawer affords the bank some means of immediately identifying the payee, he must be taken to have intended that the bank should see to his identity. He therefore cannot complain if the bank takes a reasonable time to do this. Therefore the action of the bank in not immediately paying the cheque would not be considered a refusal to pay, entitling the drawer to an action for damages because his cheque was dishonoured. If the cheque had been accepted by the bank and a liability thereby incurred towards the payee, the bank's refusal to pay immediately on presentation by the proper person would give him the right to sue the bank at once, but his claim would be limited to the amount of the cheque and interest; he would have no claim for special damages; and, as costs are now in the discretion of the Court, it is entirely probable that the Court would refuse the plaintiff his costs if he were unreasonable in commencing his action, and if the bank in delaying payment acted reasonably under all the circumstances and paid the amount into Court as soon as it obtained reasonable evidence of identity.