Seanad Éireann debate -
Wednesday, 22 Jul 1959

Vol. 51 No. 6

Cheques Bill, 1959—Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

Minister for Finance (Dr. Ryan)

In 1957, following the report of a Committee of inquiry an Act was passed in Britain which had the effect of abolishing the need for endorsing any cheque which is paid into the bank account of the payee. Since then banks here are being caused no little inconvenience as numbers of cheques drawn on them in favour of persons resident in the Six Counties and Britain are collected for payment by the banks there without being endorsed and the banks here are obliged to return them for endorsement. This involves work and expense.

The Irish Banks and the Association of Chambers of Commerce have asked that the advantage of the abolition of the need for endorsement should be extended to them and their customers and members. About 27½ million cheques, etc. are issued in the State annually and of these about 25 million are paid into the payees' bank accounts. The time spent by business firms in endorsing cheques and by banks in checking the endorsements and in dealing with those found to be technically irregular is, therefore, considerable and quite a substantial saving would be affected by the abolition of endorsements. The present Bill does this. In addition it makes further provisions in the law relating to cheques similar to those introduced by the British 1957 Act and thus restores uniformity in the matter with the Six Counties and Britain. This is a matter of some importance in view of the larger exchange of cheques between the two areas.

The provisions of the Bill, which protect banks paying or collecting unendorsed cheques, do not explicitly exclude cheques cashed over the counter. This would create an anomaly as it would mean that a banker who paid a wrong person on an unendorsed cheque would attract some liability whereas if he paid out in good faith on a forged signature he would be protected under the Bills of Exchange Act, 1882. I am advised, however, that the banks intend to follow the practice of the Six Counties and British banks in continuing to insist on the endorsement of cheques cashed over the counter.

Section 1 of the Bill extends to unendorsed cheques and similar instruments the protection which a paying banker at present enjoys in respect of endorsed cheques and other instruments.Similar protection is afforded to the collecting banker by section 4 (3). Section 2 preserves the existing rights of a collecting banker as a holder of a cheque in due course notwithstanding that the cheque has not been endorsed. Section 3 provides that a paid unendorsed cheque is evidence of the receipt of the sum payable by the cheque and thus will have the effect of reducing the number of cases in which drawers of cheques will require the payees to give receipts on the backs of cheques. I should stress that the section would not make a paid unendorsed cheque conclusive evidence of receipt but that it would be open to any person to put forward rebutting evidence.

Two further amendments of the law relating to cheques and similar instruments are made by the Bill. Sections 4 (1) and 4 (2) extend to uncrossed cheques and similar uncrossed instruments the protection against claims for conversion afforded to collecting banks by section 82 of the Bills of Exchange Act, 1882, as amended. At the same time Section 4 (1) (b) provides that this extended protection applies where any of the instruments in question is accepted for collection and the payee's account is immediately credited.

Section 5 consolidates the present legislation regarding the application of the provisions of the Bills of Exchange Act, 1882, relating to crossed cheques to instruments not being bills of exchange.

The consequential repeals of existing legislation are dealt with in section 6 and mentioned in the Schedule to the Bill.

In order to give banks and the business community time in which to prepare for the introduction of the new arrangements section 7 (2) provides that this Bill shall not come into operation until three months after it has been passed.

Mr. McGuire

This, like the Bankers' Books Evidence (Amendment) Bill which we dealt with yesterday, is a Bill that is welcomed by the banks and business community. It is something which, I feel, was necessary because of our intimate relationships with both Northern Ireland and Great Britain in the exchange of money for the payment of goods and services. As the Minister said, the British Cheques Act of 1957 applies in Northern Ireland where, of course, there are many branches of banks which are situated in Southern Ireland and vice versa.

This Bill, as the Minister said, was asked for by the banks and chambers of commerce who went into the whole question in detail. They could not see any particular difficulties in having the same legislation here as existed in England. In fact, they felt it was essential that we should have the same law here in connection with cheques. No particular difficulties appear to have arisen in England or Northern Irelad in the carrying out of this new method of dealing with cheques. I do not see why there should be much difficulty here.

I note that the Minister in his statement answered some of the difficulties which were raised in the other House. I think he did so very satisfactorily. I gathered from one of my colleagues that he is still not satisfied that the customers' interests will always be as secure as they were in the past. Perhaps, I shall say something on that later on. My own opinion and that of the general public is that the amount of time, trouble and expense saved will be well worth any little danger there might be of looseness.

I should like to say something in general, though apropos this Bill, as this is the Second Reading. The Bill is a step towards smoothing and improving the machinery for economic co-operation between the Republic, Great Britain and Northern Ireland. I think it is becoming generally accepted in nearly all circles that that will help to further economic co-operation between this country, the North and Great Britain, which is a very good thing, indeed.

It is not only good as an economic policy but as a good neighbour policy. Any form of coming together and working together with our northern fellow-countrymen cannot but improve relations between us and therefore advance the time when a real unity and a full unity may be established between us.

The purpose, as we know, behind the economic arrangements involved in the Common Market and the Free Trade Area movement which have been going on in Europe, and about which we heard so much this week, is admittedly political. It is known that people cannot be brought together politically in Europe, in order to defend western civilisation against the Communist menace, in a hurry and it has been conceived, and I think rightly conceived, that getting people together economically and in a businesslike way, will inevitably lead to political unity. That, I think, is feasible in the shortly to be formed Common Market. The other nations who are not in the Common Market are showing the same feeling and they are getting together in another form, with the ultimate idea of uniting together in a political union. Perhaps we have there some kind of headline for us, and that this little Bill is one step towards co-operation with our neighbours.

Yesterday in the Dáil the Taoiseach referred to his wish and his willingness to establish economic co-operation with the North. I agree with those sentiments and I think we all agree with them, in the belief that this economic co-operation cannot but lead ultimately to closer relations of all kinds. In business relations, one makes personal relations and when that is done, you can very often make political relations. From small beginnings, I think ultimately we may get very big results and therefore I think this Bill is a very good step and it could be copied in other spheres of our life so that we could get ourselves more on all fours with our neighbours.

Mr. O'Quigley

I can see the necessity for introducing certain sections of this Bill in order to facilitate banking transactions between this country and Northern Ireland and Great Britain but the Bill goes a good deal further than that, as I hope to demonstrate shortly. The Minister told us that this Bill has been introduced at the request of the banks and the chambers of Commerce and it is designed to facilitate business transactions and, presumably, to lower costs and improve efficiency. I must say if that be the case, and it appears to be so, it amuses me vastly because there is hardly a meeting of directors of banks or of chambers of commerce at which they do not preach the necessity for greater efficiency and the cutting down of costs and increasing output. They are not above complaining about increases in taxation and rates, or to attributing those increases to the inefficiency and wasteful procedures of public servants, whether in the Civil Service or the local authorities.

It appears, however, that when the banks wish to increase efficiency, they do not go about it in the same way as they exhort other people to go about it. They have to get a Bill introduced specially to facilitate them. If efficiency could be increased by Acts of Parliament, we could become a very efficient country in a short time. It is certainly open to comment that the very people who spend so much time lecturing public servants on the need for efficiency and complaining about taxation require a Bill to facilitate them in their operations.

The Minister said that certain objections were raised to some of the provisions of this Bill, particularly in relation to the position of a person who hands in a cheque which is cashed at the counter and where that person is not the owner of that cheque. He says that the banks have indicated that they will follow the practice of acquiring, presumably, due identification that he is the owner of the cheque. If that be the case, I do not see why a saver is not made in the Bill. I do not see why the Bill relieves banks from the obligation of satisfying themselves that the person who has endorsed a cheque and who hands it in is the owner because the banks will still have to segregate the unendorsed cheques from the endorsed cheques.

The Minister said that the banks say they are not going to take advantage of that provision in this Bill. In practice, they will not, but if they happen to get a cheque which belongs to me and which is cashed by Mr. X., I have no remedy against them and the banks can say that this was done in the course of business and plead this Act. It seems to me that in that respect the Bill affords no protection to the person who will not have many cheques and who will not have facilities for safeguarding these cheques from theft or robbery. It also seems to me that this Bill is going to facilitate criminals in their activities. Anybody who reads the newspapers must be disturbed by the number of raids made by burglars of business premises. One is consoled, however, when one reads that there was very little cash in a safe which was blown open and that most of the contents consisted of cheques. There is nothing to prevent somebody who gets some of these cheques, particularly if the owner happens to be a small businessman, from going to a small town, producing due identification and handing in the cheques unendorsed. Under this Act, of course, the bank is to be relieved of all liability in relation to the owner of the cheque.

The Minister has said that this measure has been introduced following the report of a British Commission of Inquiry. That is factually correct. What the Minister has not told the House is that Deputy Sweetman told Dáil Éireann that the English Bill omitted some of the safeguards about which I am speaking and about which Deputy Sweetman spoke in the Dáil, safeguards for small business people in relation to cheques cashed over the counter. I have not seen the report of the Committee Stage of this Bill in the Dáil but certainly the Minister did not give what was, to my mind, a satisfactory explanation as to why he, like the British Parliament, omitted the safeguards provided in the report of the Commission of Inquiry in relation to the matters I have raised.

Dr. Ryan

First of all, with regard to the question raised by Senator McGuire, as far as this Bill goes, I do not think that the customer is less safeguarded than he was in the past. After all, this Bill only goes so far as to say that if cheques are made payable to me and if I lodge them to my own account without endorsement, they are all right. They are all right in this way, that the banker cannot be accused of negligence in accepting them; but, of course, if there is anything wrong with the cheque, if it is forged or anything like that, the law still stands. It only relieves the banker of the charge of negligence in accepting such cheques. If a person has an account in the bank, it is presumed that the bank knows the person and believes he is an honest man and it, therefore, accepts these cheques without endorsement and pays them. Now, if he is not an honest man, this would not prevent him doing a dishonest act by, say, forgery. Therefore, I do not think it makes any difference so far as safeguarding the customer is concerned.

Now, in regard to paying a cheque over the counter, I am not sure if the last Senator understood me correctly. If someone gives me a cheque payable to me and if I go into the bank and say I want cash for it and hand the cheque in over the counter, they say: "Endorse it and we will give you the cash." So far as this Bill is concerned, it would safeguard the banker, if he did not ask me to endorse it. It would safeguard him again to the extent that he could not be held guilty of negligence in not asking me to endorse it. In practice — and this is the practice in Britain at the moment — the bankers in England and the North of Ireland have not gone so far as to pay cheques over the counter in that way without endorsement and the bankers here will follow the same practice. I should say that they will do so "for the moment", because the legislation will be there and would enable them to change their practice in that regard at a later stage, if they thought it desirable to do so.

The object of this Bill is to relieve the banker of the charge of negligence in accepting a cheque without endorsement and that is really as far as it goes. Of course, it deals with paying orders as well as with cheques. A person can still see that his cheque will be lodged in the bank rather than cashed by another person, by crossing it. A crossed cheque will still have the same rights and liabilities as it had before this Bill was passed.

I do not think we are doing anything very revolutionary in passing this Bill. It may be a convenience for big firms. It is no great convenience for the ordinary person who is living by earning a salary and so on. If he has to endorse a few cheques in the month it is no great hardship to him. However, it will be a convenience to firms who get a lot of cheques. It will be also a convenience to the banks in respect of examining the endorsement on every single cheque that goes through, which they are obliged to do at the moment.

The point I made at the beginning is a very important point and it was referred to by Senator McGuire. It refers to having one practice in the North of Ireland and England and a different practice here, leading to great inconvenience. For instance, a person sends a cheque to the North of Ireland at the present time in payment of some account, the Northern recipient lodges it without endorsing it; it comes back to the paying bank here and they send it back again to the North of Ireland bank to be endorsed before they can deal with it. That has led to a great deal of inconvenience and it was necessary for that reason to bring in this Bill.

Question put and agreed to.

Agreed to take the remaining Stages today.

Bill considered in Committee.

Sections 1 and 2 agreed to.

SECTION 3.

Question proposed: "That Section 3 stand part of the Bill."

Dr. O'Donovan

When I saw this section, I formed the same conclusion as my colleague, Senator O'Quigley and as Deputy Sweetman did in the Dáil. The Minister has said they intend to follow some other practice. We had much the same kind of point yesterday in connection with some other Bill. We should not legislate in this way, in the first place. However, leaving that aside, what the banks are going to do in practice has nothing to do with the way this House legislates. A bank can say subsequently in making a change: "The Minister said such and such when introducing the Bill, but we are not bound by that; this is the law."

The point is that there is a significant change. A cheque is made payable to the Minister for Finance — to Séamas Ó Riain in his private capacity — and something happens that cheque. It disappears through a lot of people and it ends up in a bank. Up to the present, it was conclusive evidence, when Séamas Ó Riain went into court and said:—"This is not my signature".That finished the thing and showed that he had not got the money. Now he has no proof, there is an absence of proof that he has not got the money, as there is no endorsement on the cheque.

Cheques in Ireland admittedly go from one person to another. Some of the people concerned may insist on their being signed, just as some people insist on signatures on bank notes for big amounts. In fact, I have been told — I do not know if the practice still exists — when a person gets a £1,000 bank note, he signs for it, that each £1,000 note is made up in a little book — or was in the past — and a register is kept of where they pass from one person to another. The most obvious group of people in this country in this connection are the cattle dealers. They give vast sums of money around like pieces of paper. I think there will be difficulty arising in this connection. Let me say what I think as an ordinary person. If there is to be a loss under a system of non-endorsement, in the ordinary way a loss of £100, £1,000 or £10,000 is a snap of the fingers to any one of the commercial banks, but it might be a most serious loss to a single individual. I think we should not legislate on that basis in the Oireachtas. I do not mind whether this is the same as the British Act. I do not mind whether it is the same as a universal Act. It simply is not good practice, in my opinion.

In regard to the other protections for the banks, I do not see any great objection to them, but this is certainly an exceptional protection. It is not good enough for the Minister to dig up — I use that word without animus, but it was dug up, since the Bill was brought before the Dáil—that it is not "conclusive evidence". I know there is a difference. If the phrase in the section were that it was "conclusive evidence", it would be worse than it is. We grant that straight away.

All this is a kind of fog or smoke-screen, that the banks are going to do such and such a thing in practice. It is said that this point is here and we are legislating in this way, but that it will not operate in this way. That is just not good enough, in my opinion. Quite frankly, I do not see why this section is required in the Bill at all. In the ordinary way, these documents pass around in their tens of thousands and the banks have to deal with them. I do not see the necessity for this kind of provision in the Bill. What is it? It is a provision giving protection to the big people against the small people. That is what it is. It is based on the lines of the law relating to real property, and it is based on various other laws that have greater regard for property rights than for the rights of the ordinary small person. It may not have any serious effect, and then, in one case, it might be very objectionable.

Mr. O'Quigley

The Minister has illustrated the difficulty which has arisen by reason of the passing of similar legislation in Britain. Cheques payable in Northern Ireland which are not endorsed come here and have to be sent back to Northern Ireland to be endorsed. If that is the position, would it not remove the difficulty of the banks, if it were provided in this Bill that, in those circumstances, cheques payable in Northern Ireland or in Britain would not have to be endorsed and that the provisions of the Bill would not apply to them? I do not see any reason why it is necessary to bring in these stray transactions which, as Senator O'Donovan pointed out, may mean a permanent loss to an ordinary person. A cheque for £15, £20 or £30 may be a whole month's wages, and a cheque can easily get lost and no matter what protection is provided by this section, the banks can always say: "Well, the Cheques Act, 1959, is the complete answer."

Dr. Ryan

The banks, of course, will continue to be obliged to make sure they are paying the right person. If any of us go to our own bank to lodge the few cheques we get, we do not endorse them but there is evidence that they go through the banks because they are stamped. The banks are liable, if they can be accused of negligence in any way, so I do not see, as I said at the beginning, how endorsement makes any difference in that case. If I am honest and I lodge my cheque without endorsement, it is stamped in the bank and everything is all right, but if I am not honest, endorsement makes no difference. It is very easy to forge an endorsement so the same safeguard remains so far as that is concerned.

The example given by Senator O'Donovan, if I understood him correctly, does not arise here. What he suggested was that a cheque made payable to Séamas Ó Riain which is passed around from one person to the other may not be endorsed, but that cannot be. Unless I endorse it, it cannot be passed around. At the moment, a cheque made payable to me cannot be accepted, except in my own account, unless it is endorsed. That is the only point. I must pay it into my own account, otherwise it must be endorsed as in the past.

Dr. O'Donovan

Not at all.

Dr. Ryan

Section 3 has nothing to do with it. I am not talking about the endorsement part of it but that it cannot be passed around. Section 3 deals with evidence. It could happen that a person would say: "I did pay that account. Here is the cheque." The cheque is retained for evidence in the court, but it is not conclusive evidence because it might be forged, even if it is endorsed. It is the same evidence now if not endorsed, as it was before, if it was endorsed. That is the only point, so far as this section is concerned.

It would, of course, be out of keeping with this Bill if that were not put in because if we were to say: "Well, an unendorsed cheque will not be payable", naturally nobody would endorse their cheques, if they could not produce them as evidence. If I pay a bill by cheque and if the payee lodges the cheque to his own account, there is evidence that it went through his own bank because it is stamped. It goes back to the paying bank and I produce the cheque and I say: "Yes, I did pay that account. Here is the cheque which he paid into his own account and which has come back to my account". That is as good evidence now as it was before, when the cheque was endorsed.

Dr. O'Donovan

All that Section 3 lays down is that it is evidence that the sum was received by the payee.

Dr. Ryan

That is right.

Dr. O'Donovan

The fact is that formerly the evidence that the sum was received by the payee was his signature on the back of the cheque in the great majority of cases. Now that evidence is gone. I quite appreciate the purpose, the double purpose, for which this section was put in. Really, it is to clear the lines primarily, and I appreciate the point the Minister is making. This section does make a difference and no amount of saying, as the Minister said originally — and I think he did it rather well — that the customer is as safeguarded as he was in the past will make me agree with the Minister. I think the customer is considerably less safeguarded.

If some case arises, I do not know what the reaction, say, of one of the banks concerned might be, but there is a chance that some small person might be seriously inconvenienced. In any event, he will be inconvenienced because he may be out of his money for a long time, even though he eventually maintains his case, whereas, at the moment, he can say: "That is not my signature". No amount of forgery will make it his signature and in the bulk of cases that is the difference and it is apparently what happens.

Supposing a man gets a cheque or supposing a cheque is shown to him and although he did not intend in the first instance to do so, he puts it into his pocket and then decides: "I am going to cash that cheque." Under the existing law, some name has to be written on the back of it but under the new law, no name will have to be written on the back of it. It certainly does make fraud easier. What I am concerned about is the non-endorsed cheque which appears to have been paid by a banker and which is evidence of the receipt by the payee of the sum payable by the cheque. Primarily, the sum is paid by the banker acting as agent for the person who draws the cheque, and it is eventually paid by the person who provides the money to pay it. Cheques are not handled in the simple way which has been suggested. They are handled in the most complicated ways and they go through numbers of hands before they come for payment.

I am not suggesting that this Bill, as a whole, is objectionable but I do not understand why this proposal, if it is designed as the Minister says as evidence of the receipt of money payable, is not carried out in some other way. I simply do not appreciate the necessity for the particular phrasing in the section. I understand from the Minister that he suggests it is purely evidence that the payee has received that amount.

Dr. Ryan

At present, if I get a cheque covering the amount due to me and endorse it, then, when that cheque goes back to the person who made the first payment, he can produce it as evidence that the bill was paid. When this Bill is passed, if I get a cheque and lodge it to my account in my Bank, there is the evidence that my bank accepted that cheque and passed it on. I think the evidence is just as good in one case as in the other. I do not see any difference.

Mr. O'Quigley

Has not, from time immemorial, great sanctity been attached to the signature of a man to a document? Is it not nowadays possible to take a cheque which had been made payable to me and to forge my signature? Then, if the question arises, I have to swear in Court that that is not my signature. There are ways and means of making quite sure. There are handwritting experts and the observations of people to determine whether or not the signature is in fact in my own writting and whether a person has or has not been paid by way of a cheque.

With regard to an unendorsed cheque paid into my account, if I am paid £17 18s. 11d., and the bank can produce evidence that on 22nd July my account was credited with £17 18s. 11d., it is fairly conclusive evidence that that sum was paid to me. With regard to a cheque for £17 18s. 11d. which is made payable to me and which somebody else gets and hands into a bank and represents himself as being me and the amount is paid out to him in cash then, under Section 3, the fact that that amount has been paid by a banker is evidence that it has been paid to me.

Dr. Ryan

If the Senator hands it to somebody else, he must endorse it.

Mr. O'Quigley

Suppose it is stolen?

Dr. Ryan

You must endorse it, unless it is going into your account.

Mr. O'Quigley

That is not so.

Dr. Ryan

It is.

Mr. O'Quigley

Where is that provided?It is provided that I can pay into my own account or that I can hand in an endorsed cheque which can be credited to my account. It is provided that I can get the cash for it. If it appears to have been paid by the banker on whom it was drawn, then, under Section 3, that is evidence, whether it was handed in by me or by a thief, that I received the money. That leaves the situation open to all kinds of abuses. There will be people who will be very sorry that the Minister did not limit the provisions of Section 3 in some way so as to safeguard the position.

Question put and agreed to.

Sections 4 to 7, inclusive, agreed to.

Schedule and Title agreed to.

Bill reported without amendment.

Agreed to take remaining Stages today.

Bill received for final consideration and passed.

Tomás Ó Maoláin

The Dáil has passed the Export Promotion Bill and the Minister for Industry and Commerce is available now to take it, if the House agrees.