[Volume XXV
THE CHICAGO BANKER
18
some case arises which has to be taken into the
courts.
Alteration of Cheques from Order to Bearer.
A further danger lies in the alteration of cheques from order to bearer under an authority given by initials only. The greatest care is needed to ascertain whether the initials are those of the party who is authorized to sign the cheques themselves.
Cancellation of Paid Cheques.
A fraud has, I believe, recently been perpetrated (and, indeed, I am surprised it has not occurred before) through the removal of the cancellation marks on certain paid cheques, which were then presented, and paid a second time. A stamp perforating the cheque seems to be the obvious remedy, and, as happily in this case co-operation is not necessary and no honest client can object, the remedy is open to any of us to adopt. Altogether the system of surrendering paid vouchers, which is contrary to the old practice and, I believe, to the existing practice of the Scotch banks, is open to danger.
Size of Cheques.
Finally, I should like to allude to the size of cheques, which now seems to vary between that of a newspaper and that of a visiting card. I cannot see what value as an advertisement one of these cheques can be to the party issuing it; for, of those persons through whose hand's it passes, he is already in business relations with the payee; while the bank clerk, who receives it, and the clearing clerk, who clears it, are certainly not likely to be induced by it to transfer their custom to the offending firm. There is no doubt that in many cases the cheques are intended to be advertisements, and the name of the paying banker is sometimes the least conspicuous part of the cheque. If only inconvenience were caused, there would perhaps not be much harm done, and I suppose the practice may always be said to give encouragement to the engraver’s art. But, as a matter of fact, these freak cheques (if I may use an American expression) do occasion not only great inconvenience, but also loss of time, and risk; and surely it should be in the competence of the clearing house to decide what sized cheques it will clear, leaving those outside their limits to be dealt with outside the clearing house. Here, again, a little co-operation might at once effect a cure, and if it is so difficult to bring about change even in such a comparatively small point, how much more so in the case of the many graver problems with which we are confronted. In this connection it is worth noticing that a committee of the American Bankers Association appointed to consider the question of uniformity of stationery made the following recommendations in September last: “That for business purposes the following bank paper be of the uniform size of 3;A by 8 inches and in colors as follows : checks in white, bills receivable in green tint, certificates of deposit in pink tint, drafts in yellow tint, receipts in slate tint.”
■Bankers have far too few opportunities of meeting and discussing their common interests in a friendly spirit. I would certainly not be thought to underrate the excellent work done by the Association of Country Bankers and by the Central Association of Bankers. These two institutions carry on between them a great deal of useful and necessary work, and undoubtedly succeed in focusing attention on a number of points worthy of consideration, while through their legal advisers they give material assistance in the elucidation of difficulties. Yet the meetings of these bodies are not very frequent; they are short and businesslike, and those who attend are generally so busy that there is very little opportunity for that friendly and informal discussion, which so often leads to important results. If the
land registry, explaining the advantages of the system, and the safeguards it afforded.
We have most of us now had some practical experience of the working of the system, so far, at any rate, as it affects banking securities, and are in a position to judge its relative advantages and disadvantages from a banking point of view. So far as banking securities are concerned I cannot see that the system affords us any practical protection, and, indeed, it appears to be capable of involving us in risks from which we were previously free; and the trouble and time expended in searching the register, and lodging notice of deposit of the land certificate, are considerable, and in many cases, in the ordinary course of business, it is impossible to take these precautions.
We all know that this system of land transfer has met with great opposition, and as it has now had a fair and, indeed, an extended period of trial, I hope that the scope of the commission is sufficiently wide to enable the commissioners to report whether its advantages (if any) are so great to overbalance the undoubted difficulties, delays, and expense which it involves. At any rate, I hope the commissioners will be able to report as to the desirability of continuing the compulsory provisions of the act. It seems obvious that if the system is beneficial compulsion is unnecessary, while if it is not beneficial it should cease to exist.
Unification of Laws of Bills of Exchange.
From time to time discussions take place as to the possibility and desirability of assimilating the laws of various nations in regard to bills of exchange. A conference of international law met at Budapest this year and discussed the question; and I believe now official invitations have been issued by several governments to a conference on this question to be held at the Hague. Whether or when such a conference will be held I cannot say. There can be no doubt it would be very desirable to give this endeavor every support and bring international law on this point more into harmony. If it is not possible to have one law relating to bills of exchange all over the world, yet a good deal can be done to correct anomalies, which hinder trade and often lead to loss. Your council has given very careful attention and devoted much time to this question. They have taken legal advice, and are in the position that they are prepared with carefully-thought-out suggestions, when the proper time arrives.
Typewritten Cheques.
I will now for a moment turn from the legal to some of the practical difficulties with which we have to deal. In great part they are difficulties which could be solved with ease, if only there were a little more co-operation and friendly consultation between bankers. Time after time your presidents have insisted on the necessity or extreme desirability in our common interests of such co-operation. Yet how difficult it is to bring it about even in comparatively small matters. Take the case of typewritten cheques and bills, in which I am sorry to say there is a considerable increase. The danger to bankers of such typewritten documents, where the figures and writing can so easily be obliterated or altered, is obvious. Surely no reasonable client could object if we one and all set our faces against this practice, and notified our customers that we should in future decline to pay typewritten cheques. As matters stand I suppose there will have to be very heavy loss to some one before any decisive measures are taken.
The disinclination to do anything in writing nowadays is growing apace. There is even a tendency to have signatures impressed with rubber stamps. How will you guard against forgery in such cases? In the case of public companies I doubt whether any of them are authorized by their articles to sign cheques with a rubber stamp. Why should we wait to take action, until
sity for registering afresh every time the advance is increased beyond the amount covered by the original stamp.
A further point of importance is the clause referring to borrowing on debentures. Section 15 (1), with regard to the power of reissuing debentures, was considered in my last year’s address. As to the interpretation of section 15 (3), which deals with the case of debentures deposited to secure a current account, there has been and still is considerable difference of opinion. And it is safer in all cases where it can be done to make advances to a company by way of loan and not by way of overdraft; not only because of this doubt, but also because if the directors' powers are limited, as they often are, an overdraft to the company is dangerous, and may be ultra vires on the part of the directors.
Section 13 of the act is very important. It provides that a floating charge on the property of a company shall (unless it can be proved that the company immediately after the creation of the charge was solvent) be invalid if the company is wound up within three months of the creation of such charge, except to the amount of cash paid to the company at the time of, or after, and in consideration of the charge.
Other points have, no doubt, also been considered carefully by most bankers.
Prospective Legislation.
Besides these various considerations to which recent legislation gives rise, we have to take notice of bills that are or may be in contemplation. I would call your attention to the report published last summer by the Board of Trade Committee on the bankruptcy law and its administration, which will demand very careful consideration. Sections 92-97 are intended to remedy the state of affairs evidenced in the case of Ponsford Baker v. Union Bank, which shows how difficult it was to determine whether an act of bankruptcy had been committed in a given case. The effect of the recommendations of the committee would be to make notice of presentation of a bankruptcy petition (instead of notice of an act of bankruptcy) the crux of the position in determining when a banker should stop payment on his customer’s account. This would certainly simplify matters, but it would apparently be quite a reversal of the policy of our bankruptcy law.
Sections 106-113 bear on the question of dealings with an undischarged bankrupt, as to which, as you are aware, the position is at present very unsatisfactory. It would be a great advantage in this connection if the law as to real and personal property were put on the same footing.
There are other suggestions in the report of great interest—for instance, the recommendation that certain assignments of book debts should be registered, and its recommendation as to the position of women under the bankruptcy law, the discharge of bankrupts, and so on; and it is to be hoped when a bill comes up for discussion in the house of commons, the interests of bankers will be carefully watched. In this connection the hardship inflicted on a banker by reason of his having to repay to the trustee the amount of any cheques paid by him after his customer had been made bankrupt without his knowledge should receive consideration. I speak on the assumption that the report of the committee will lead to a bill being introduced; but that is not, of course, an invariable sequel to a royal or departmental commission.
Land Transfer.
No doubt many of you are aware that a royal commission has been appointed “to consider and report upon the working of the Land Transfer Acts, and whether any amendments are desirable.” You will remember that registration has been compulsory in the County of London for the last eight or nine years with regard to certain dealings with landed property, and that we had the benefit, a few years ago, of a paper read to us by Mr. Brickdale, the learned registrar of the