Effect of the

words "Not

printed on Postal

"of being privileged receivers of stolen cheques, and the public "will be deprived of the protection they desire."

You see, therefore, that able and outspoken advocacy was not lacking to the opponents of the legislation of 1876, and this fact is important when we find that, after an experience of eight years of the working of that Act, its provisions were confirmed and adopted by the Legislature, aided by such able commercial, banking and legal advisers as those who drafted, criticised, and finally approved the Bills of Exchange Act, 1882.

We have now seen that the words "not negotiable" have no statutory significance whatever, except as part of the crossing of a cheque, and that when so used they strike out the second quality of negotiability in its widest sense, that is to say, they prevent an indefeasible title from being acquired by honest acquisition for value, but they leave the element of free transferability unimpaired. We have noted that besides this technical sense, they are often used in the sense of "not transferable," the sense in which they are used in that portion of the Bills of Exchange Act devoted to the negotiation of Bills.

You agreed, I think, with me, on a former occasion, that this two-fold use of the words, in the Act itself, might be answerable for a good deal of the confusion which exists in the minds of the general public as to "not negotiable," and I promised to show you that this confusion also existed in the minds of public officials. You probably all remember that somewhere about the year 1892, negotiable" a new form of postal order made its appearance, bearing as a heading, the words, "Not negotiable." The precise effect of these words was of course a matter of importance to bankers through whose hands these documents pass in considerable quantities. The Secretary to the Institute of Bankers accordingly wrote to the Postmaster-General on the 6th October, 1892, at the desire of the Council of the Institute, to ask (for the information of their members) what is the precise meaning of the words "not negotiable" which are printed at the head of the postal orders. Mr. Talbot Agar enquired :

Orders.

Correspondence thereon

between the

Institute of
Bankers and

the Post
Office.

"Are such words to be understood :

(a)" In their technical and legal sense as defined by the Bills "of Exchange Act, 1882, ss. 76, 77, 81; or

(b) "As simply meaning not transferable?

"As regards (a), it may be remarked that the Act apparently "only authorises the use of the words, 'not negotiable' as part of "the crossing of a cheque."

In reply, the acting secretary of the Department was "instructed "by the Postmaster-General to point out that a postal order is an "order for the payment of money to the person named therein, "and therefore is not negotiable in any case. Consequently, no "person has a better title to an order than the person from whom

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"he received it. The object which the Post Office had in view in printing on the orders the words in question, was to bring more prominently to the notice of the public the fact that such orders were not negotiable or transferable. That is to say, that by the use of these words the Post Office warns the Public, that by "accepting a transferred order, the individual so accepting, does "so at his own risk."

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Now here it will be observed that we are first told that because a postal order is an order for the payment of money to the person named therein, therefore it is not negotiable (i.e., transferable) in any case. But this by no means follows. Because an order to pay to the person named therein might possibly be complied with, as it would be now if the instrument is a bill, by a payment to the order of that person. But let us assume that the one thing follows from the other, and that a postal order to pay a named payee is equivalent to an order to pay him ONLY. If such is the case, then no other person can have any title at all. Yet we are told in the very next sentence that the consequence is precisely that which results from putting not negotiable on a crossed cheque which remains transferable, but loses its quality of carrying with it an indefeasible title to an honest acquirer for value. If no other person but the payee can have any title at all, it is surely misleading to say: "consequently no person has a better title to an order than the person from whom he received it," because this implies that if the transferor has a good title, he can pass on an equally good title to his transferee. One is led to believe that the order may be transferable after all. The next paragraph, however, dashes any such hope by stating that "the object of the Post "Office in printing on the orders the words in question, was to "bring more prominently to the notice of the public that such "orders were not negotiable or transferable." Here at all events we feel that we have it, in black and white, that the named payee has no power to transfer his right to receive the money to any other person whatever, and that no question of risk, or the title of the transferor can arise, because the transfer is simply a nullity. But once more we are plunged into doubt and difficulty by the explanation which follows:-"That is to say, that by the use of "these words the Post Office warns the Public, that by accepting "a transferred order, the individual so accepting, does so at his "own risk." These concluding words can hardly mean that the individual so accepting gets a piece of waste paper in any event. They clearly point to the possibility of his having a right to receive the money if the title, of which he has taken the risk, turns out to be a good one.

The Council of the Institute, having thus been twice told in one letter that "not negotiable on the postal orders means not transferable, and twice, in effect, that it means transferable subject

to defects of title, were, I think you will say, justified when at p. 596 of Vol. 13 of their Journal they described the reply of the Post Office as hardly to be regarded as satisfactory.

And if you will refer to that page of the Journal you will find reprinted a correspondence which appeared the month after in The Standard between an unfortunate lady, to whom one of the new orders had been sent, and the Receiver and AccountantGeneral of the Post Office, to whom she appealed for advice as to how she could turn it into money. The postal order had been crossed"&Co.," and was made payable to herself. The lady wrote to say that under the new rules it was perfectly useless to her as she had no banking account and could not cash it either at a post office or through any friend or tradesman having a banking account. The reply was that "the Department has no power to pay a crossed postal order except to a banker. Any banker, however, to whom you are known could obtain cash for you in "the same way as he does for a client, or a friend who has a "banking account would no doubt cash the order for you."

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Here we have the noteworthy fact that the Receiver and Accountant-General distinctly recognises, as a perfectly regular transaction, the transfer of the order by the original payee to her friend, in exchange for value, and the right of the transferee to pass on the order to his own banker for collection. On the other hand the acting secretary, as we read just now, had been instructed to point out to the Institute of Bankers that it followed (as a matter of logic, or of law), from the postal order being an order for the payment of money to the person named therein, that, therefore, it is not negotiable in any case. And to show that by not negotiable the Post Office meant not transferable, the acting secretary's letter went on to say the object of the Post Office in introducing those words was "to bring more prominently to the "notice of the public that such orders were not negotiable or "transferable."

Well the poor lady tried to turn her postal order into money, in accordance with the suggestions of the Receiver and AccountantGeneral, with the result which was to be expected. The bankers and the public had been so effectually impressed by the warning issued from the Post Office that the words "not negotiable" meant not legally transferable, that neither banker, tradesman nor friend would have anything to do with the order which the lady tried to get them to cash for her on the advice of the Post Office itself! The failure of these further attempts to cash the order having been brought to the attention of the authorities, with a request from the lady that the Department would make a special order for her to receive the amount at a post office, the reply, containing the ultimatum of the Post Office, stated that "the Department has no "power to pay a crossed postal order except to a banker. The

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"words not negotiable' have no statutory meaning as regards postal orders, they merely indicate the fact that the holder of a "postal order cannot convey to anyone a better title than he has "himself."

But this is precisely the statutory meaning provided in the case of crossed cheques.

The reply continues: "In the case of a cheque the words have "a statutory meaning, and a crossed cheque with the words added "cannot be paid by a banker to anyone other than the payee, "and then the amount can only be placed to the payee's account." This, on the other hand, is not the statutory meaning in the case of a cheque.

But the reply proceeds to make this important announcement: "There is no legal objection to anyone having a banking account cashing a postal order for you if he wishes to do so.' And it concludes thus: "If you cannot get the order cashed through a "banking account, I can only suggest that you should return it "to the person from whom you received it."

So that all the previous statements about the postal order not being transferable come to nought. The order is declared to be legally transferable, and the printing on the orders the words "not negotiable" in order "to bring more prominently to the "notice of the public the fact that such orders were not negotiable 66 or transferable" seems to be unaccountable.

It is not pretended that the words have any statutory warrant, and, being printed on the orders quite irrespectively of whether the order is crossed or not, they cannot presumably have any effect in producing the result provided by the Bills of Exchange Act, 1882, in the case of "not negotiable," as part of a crossing upon a cheque, even regarding the Post Office as bankers.

It remains to be seen what will happen when one of these instruments is handed for cash to a friend, lost by the friend and passed by the finder for value to a bonâ fide holder, and rival claims to the order or its proceeds are set up by the loser and the bonâ fide transferee for value.

Upon the above correspondence, as a whole, they seem to be admittedly transferable. If they are negotiable instruments, either as bills or as coming under any of the categories mentioned in Picker v. The London and County Bank, the printing on them of the words "not negotiable" would be ineffectual and even misleading. If, on the other hand, they are (like some debentures) freely transferable, without being negotiable instruments at all, then some other form of words which has not a special significance would seem preferable to those which the Department, from the best motives, has adopted in order to warn the public of the true nature of these orders. In either case it appears undesirable that they should be officially explained to be not transferable, or that any erroneous interpretation of the words

Bills of

Provision of "not negotiable" on a crossed cheque should be volunteered when too much confusion already exists on that subject in the public mind.

Exchange
Act, 1882,

on cheques.

Cheque defined, s. 73.

Lord Bram

s. 74.

Let us now look at the provisions of the Act as to cheques on a banker, sections 73 to 82 inclusive.

A cheque, says section 73, is a bill of exchange drawn on a banker payable on demand. You will not forget that the main distinction between cheques and other bills is that cheques are not accepted by the drawee. The drawer remains the person primarily liable on the cheque, and the drawee, i.e., the banker, is under no liability for dishonour of the cheque except to his customer the drawer. You will also remember that the protection provided by section 60 against liability for paying on forged or unauthorised indorsements is limited to cheques, and does not apply to other bills.

Section 74 is the clause introduced by Lord Bramwell for well's clause, equitably adjusting the loss where a cheque has been over held, and the banker has failed in the interval. Formerly the drawer was discharged altogether from liability to the payee, and the payee had no claim for the amount of the cheque against the banker, even though the banker, after having time to realize his assets, paid twenty shillings in the pound. The effect of section 74 is to protect the drawer from any loss owing to the holder's delay, but to enable the dilatory holder to stand in the shoes of the drawer and get what he can out of the estate of the banker. Section 74 begins as follows:-"Subject to the provisions of this "Act: (1), Where a cheque is not presented for payment within a "reasonable time of its issue, and the drawer or the person on whose "account it is drawn had the right at the time of such presentment "as between him and the banker to have the cheque paid, and "suffers actual damage through the delay, he is discharged to the "extent of such damage, that is to say, to the extent to which such "drawer or person is a creditor of such banker to a larger amount "than he would have been if such cheque had been paid." Then sub-section (2), as we have seen, says how reasonable time is to be determined. And then we have this equitable provision introduced for tempering justice with mercy to the belated holder. (3), "The holder of such cheque as to which such holder or person "is discharged shall be a creditor in lieu of such drawer or person "of such banker to the extent of such discharge, and entitled to "recover the amount from him."

The wording of the first sub-section is rather difficult, but will, I think, become more intelligible if we look at it in this way

1. Suppose, at the date of the presentment, the drawer had in the hands of the bankers sufficient money to satisfy the cheque in full, then the banker's failure, and the consequent non-payment of the cheque, leave the drawer a creditor of the banker for a sum