Collecting Banks, Conversion and Confusion

Extract

The collection of cheques can be a risky business. The collecting bank is exposed to the risk of liability if the person who delivers the cheque for collection has no title, or a defective title, to the instrument. A prime example is where the cheque has been stolen. The “true owner” of the cheque (usually the person who owned the cheque at the time of the theft) may claim damages from the bank for conversion of the piece of paper on which the cheque is written, when it is deemed to have a value equal to the amount for which the cheque is drawn; alternatively, he may claim recovery of the proceeds of the cheque received by the bank in an action for money had and received. In either case the collecting bank's liability is strict.