Question 271. - 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.

Question 272. - In your answer to Question 271 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though there are sufficient funds at credit of drawer, and by the time payee is properly identified the funds are withdrawn, and payment of the cheque refused.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, - Inas much 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 271, 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.

Question 273. - With reference to Question 271, is the inference to be drawn from the answer thereto that it becomes a duty devolving upon the ledger-keeper before accepting a cheque payable to any specified person, to satisfy himself as to the identity of the said person, in order to insure the bank against the possibility of action being taken by him (the payee) on the ground of delayed payment?

Answer. - The question asked arises very naturally from the reply to Question 271, but we do not think that the change effected by accepting a cheque in the position of the bank towards the holder of it, involves consequences sufficiently serious to call for any change in the customary practice. The concluding part to the reply to Question 271 indicates that the bank would not suffer in costs or damages if it acts reasonably in the matter of requiring or procuring identification of the payee of a marked cheque.

Question 274. - A cheque drawn on the Bank of

Montreal, payable to John Smith or order, is presented by a party claiming to be John Smith, but who cannot procure identification. Is the bank in question justified in refusing to pay the cheque on these grounds?

Answer. - The point was fully discussed in the answer to Question 271. The bank is entitled to delay payment until it can satisfy itself of the payee's identity, but it is bound to do what is necessary, and within a reasonable time. If the payee is absolutely unknown to any person in the place, the bank should doubtless refer to the drawer for instructions.

The point is one which is not usually pressed to its ultimate logical conclusion, i.e., while it is the bank's duty to satisfy itself as to the payee's identity, the payee is equally interested in satisfying it and usually for his own convenience provides the necessary proof.

Question 275. - Must a bank on which a cheque is drawn get the payee, if a stranger, identified?

(2) What is the custom of banks in Toronto on this point?

(3) Does not the English law hold good in Canada, namely, that a bank is protected if the cheque purports to be endorsed by the person to whom it is payable?

Answer.-(1) The bank must satisfy itself as to the identity of each payee of a cheque to "order" paid our the counter, or pay the cheque at its own risk.

(2) It is, we believe, the practice of the banks in Toronto to require identification as a rule; no doubt exceptions are sometimes made when the amount is small, but such exceptions are at the risk of the bank.

(3) Banks in England are protected under section 60 of the English Bills of Exchange Act, which is not in the Canadian Act The position of the banks in Canada in this matter is fully discussed in the reply to Question 271.