449	5â Cheques
	Importantly, an overdraft presents a reversal of roles from a current account,
	where the bank becomes the creditor and the customer is the debtor.83 The
	Court of Appeal in Crimpfil Ltd v. Barclays Bank Plc held that a bank was ‘not
	entitled to withdraw the overdraft facility during the year of its currency and
	were in breach of contract in doing so’.84

5â Cheques

Despite the technological advances, cheques remain an important part of the relationship between a bank and its customer,85 and have two well-documented functions. First a cheque permits the account holder to obtain or withdraw cash from their own bank account.86 Secondly, a cheque allows the transmission of money from one bank account to another, or from the payer to the payee.87 A cheque is a type of money transfer form,88 and it has also been defined as ‘a means of facilitating payment’.89 A cheque has been described as a ‘non-trans- ferable payment order, because the cheque, technically a bill of exchange drawn on a banker payable on demand, in fact has been deprived of its negotiability’.90 A bill of exchange can be defined as:

an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer.91

Hudson noted that a bill of exchange has five important features. First, ‘it must be unconditional in the sense that there must not be any condition precedent before the bill is payable’. Secondly, ‘it involves a transfer of money’s worth by one person to another in that the bill itself expresses one person as being payer and the other being payee’. Thirdly, ‘the person expressed on the bill as being the person to whom it is addressed is entitled to be paid’. Fourthly, ‘the payment date may either be on a fixed date, or at a time to be fixed in the future’. Fifthly, the bill may either be paid to the original payee named on the bill itself, or the bill may be ‘indorsed’ by the payee.92 The Bills of Exchange Act 1882 also defines a cheque as a ‘bill of exchange drawn on a banker payable on demand. Except otherwise provided by in this Part, the provisions of this Act applicable to a bill of exchange payable on demand apply to a cheque.’93 Therefore, Wadsley

83Cranston, above n. 16, at 255.

84[1995] CLC 385, as cited in ‘Case comment: whether overdraft repayable on demand’ (1995) 8(7)

Insolvency Intelligence 3, 54.

85 Wadsley and Penn, above n. 1 at 417.â 86â Hudson, above n. 35, at 805.

87Ibid.

88A. Rahmatian, ‘Must cheques disappear by 2018?’ (2011) 26(7) Journal of International Banking Law and Regulation 310.

89Hudson, above n. 35, at 803.â 90â Rahmatian, above n. 88, at 311.

91	Bills of Exchange Act 1882, s.3(1).â 92â Hudson, above n. 35, at 903.
93	Bills of Exchange Act 1882, s.73(1).

450	Banking and finance law

and Penn noted that if you combine these two definitions ‘a cheque is an unconditional order in writing, signed by the person giving it, requiring the bank to whom it is addressed to pay on demand a sum certain in money to, or to the order of, a specified person or bearer’.94

The applicable law relating to cheques is to be found in the Bills of Exchange Act 1882, the Cheques Act 1957 and the Cheques Act 1992.95 Alexander described the Cheques Act 1957 as a ‘major reform in commercial and banking law and practice’.96 The 1957 Act was amended by the Cheques Act 1992, the objective of which was to ‘settle the problems respecting crossings accompanied by the words “Not-Negotiable– Account Payee only”’.97 The 1992 Act amended the Bills of Exchange Act 1882 by inserting a new section 81, which now provides:

(1)Where a cheque is crossed and bears across its face the words ‘account payee’ or ‘a/c payee’, either with or without the word ‘only’, the cheque shall not be transferable, but shall only be valid as between the parties.

(2)A banker is not to be treated for the purposes of section 80 above as having been negligent by reason only of his failure to concern himself with any purported indorsement of a cheque which under subsection (1) above or otherwise is not transferable.98

In essence, this means that:

Subsection (1), effectively, applies the provisions of section 8(1) to cheques bearing a crossing accompanied by the words ‘a/c payee only’. Such a cheque now has the same effect as one in which the words ‘not transferable’ appear on the cheque or a cheque on which the word ‘only’ is added after the payee’s name. Under section 8(1) and the new section 81A, the title to an instrument bearing any of these formulas cannot be passed by its negotiation. Consequently, the original payee, to whom the instrument has been issued, remains its owner notwithstanding his attempt to transfer the instrument. The transferee, thus, has no enforceable title and cannot bring an action to enforce the cheque in his own name.99

This represents the culmination of decades of debate on the subject of nontransferable cheques. While transferability and negotiability have always been essential features of bills of exchange which are used not only as a means of payment but also as a source of credit (and must be capable of circulating freely in the discount markets prior to maturity) cheques by contrast are generally used simply as a means of instruction to transfer funds from the bank account of the payer to the bank account of the payee and the instrument’s transferability is, in the vast majority of cases, an unwanted feature exposing both the payer and the payee to the risk of fraud by third parties.100

94 Wadsley and Penn, above n. 1 at 418.â 95â Cranston, above n. 16 at 258–9.

96J. Alexander, ‘Cheques Act, 1957’ (1957) 23(3) Arbitration, 142.

97‘Legislative Comment: the Cheques Act 1992’ (1992) Journal of Business Law (May) 270.

98Bills of Exchange Act 1882, s.81A.

99See above n. 97, at 270.

100J. Fox, ‘Legislative comment: the Cheques Act 1992’ (1992) 7(7) Journal of International Banking Law 280.