This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 145.— A customer deposits a cheque drawn on an out-of-town point, which is duly credited to him, and sent by mail for collection. It is lost in the mails, and drawer refuses to give duplicate unless the bank indemnify him.
(1) Is the bank not entitled at once to charge the amount of the lost cheque against the customer's account ?
(2) Is the bank under any obligation to give the required bond of indemnity?
(3) Should not the customer give the bond?
(4) If the cheque had been payable to another party, •who endorsed it to the customer, how can he be made responsible to the bank?
Answer.—The bank cannot charge the customer's account with the lost cheque unless it has an understanding with him that although it has credited the amount to him (i.e., has cashed or negotiated the cheque) it was acting as his agent in collecting it. In the absence of a special contract the bank had only the remedy which it would have against any endorser; it must procure a duplicate from the drawer, present it, and if dishonoured give the customer due notice. Possibly, if a " copy" is presented under section 51 (8) of the Bills of Exchange Act, and the drawee bank replies, "no funds," and the cheque is protested, the bank would have an immediate right of action against the endorser, and could charge the amount to his account.
(2) The bank, as holder, is the only party who can obtain a duplicate and must give the security. (Section 68).
(3) The customer is not concerned until the bank has established its right to charge him, as above described.
(4) An endorser on a lost cheque who comes between the drawer and the customer may be made to endorse a duplicate (on suitable indemnity being given), or he may be sued, and under section 69, cannot set up the loss of the cheque, if indemnified.