In Colonial Bank of Australasia v. Mar shall t 191)6, A.C. 559), a cheque was altered by a holder to a larger amount, blank spaces having been left. It was held that the mere fact of the drawer of a cheque leaving spaces which may be used by a fraudulent holder, is not of itself sufficient evidence of negli gence on the part of the drawer to relieve the banker from liability. This decision is a very unfortunate one for bankers.
In bills and cheques where it is visible at once that alterations have been made, a , banker will. of course, take the greatest care to see that all material alterations are pro perly initialled. But from the above cases it is seen that a banker may find himself in possession of bills or cheques which have been fraudulently altered, and the alterations may not be discernible at all, owing to the drawer of the bill or cheque having left blank , spaces when writing out the instruments. The banker may also find that, although the ' drawer drew the cheque carelessly and the acceptor accepted a bill drawn carelessly, he may not be able to prove in either case that . the carelessness amounts to negligence in the eve of the law.
If a banker unfortunately " pays money belonging to the customer upon an order which is not genuine, he must suffer. To justify the payment he must show that the order is genuine, not in signature only, but in every respect " (Hall v. Fuller, 1826, 5 B. & C. 750).
Various protections have been devised in order to prevent, or to make difficult, the fraudulent alteration of a cheque. Words such as " under one hundred pounds" or not exceeding one hundred pounds " are often written across, or stamped upon, a cheque ; or the cheque may be perforated with those words. *
The body of a cheque may also be tinted, or printed over with words or a design to show more readily if an erasure takes place. Cheque paper is also specially prepared to prevent the use of chemicals being used to effect an alteration.
The following case illustrates the import ance of seeing that any material alteration in a cheque is initialled by all the persons by whom the cheque is drawn.
In the Kepttigalla Rubber Estates, Ltnztted v. The National Bank of India. Limited (1909, 2 li.B. 1010). the plaintiffs had given the defendants a written authority to honour cheques drawn by two directors and the secretary. A cheque for E, l 5 0 was altered from " order " to " bearer " and initialled by the secretary, and the initials of one of the directors were forged by means of a rubber stamp. The other director signed the cheque, but did not initial the altera tion. Mr. Justice Bray said : " With regard to the payment of the cheque for il50, where Mr. Lauder had not initialled the alteration from ' order ' to ' bearer,' the accountants stated that it was usual for bankers to pay if two out of the three initialled the alteration. It seemed to me, however, that they would do this at their own risk ; if Mr. Lauder never initialled or authorised the alteration the payment of the cheque by the bank would not be authorised." Material alterations in a deed should be initialled by the parties signing the deed, and they should be specifically referred to in the attestation clause.