The amount which a holder may recover in an action on a dishonoured bill is prescribed in Section 57 :— " Where a bill is dishonoured, the measure of damages, which shall be deemed to be liquidated damages, shall be as follows : " (1) The holder may recover from any party liable on the bill, and the drawer who has been compelled to pay the bill may recover from the acceptor, and an indorser who has been compelled to pay the bill may recover from the acceptor or from the drawer, or from a prior indorser " (a) The amount of the bill : (b) Interest thereon from the time of presentment for payment if the bill is payable on demand, and from the maturity of the bill in any other case : " (c) The expenses of noting, or, when protest is necessary, and the protest has been extended, the expenses of protest.
" (2) In the case of a bill which has been dishonoured abroad, in lieu of the above damages, the holder may recover from the drawer or an indorser, and the drawer or an indorser who has been compelled to pay the bill may recover from any party liable to him, the amount of the re-exchange with interest thereon until the time of payment.
" (3) Where by this Act interest may be recovered as damages, such interest may, if justice require it, be with held wholly or in part, and where a bill is expressed to be payable with interest at a given rate, interest as damages may or may not be given at the same rate as interest proper." The following is a specimen of a form which may he used in giving notice of dishonour :— Please take notice that the bill for Z100 upon John Brown of King Street, Leeds, drawn (or indorsed) by you dated at months' date, due 1910, and payable at , upon which you are liable as drawer (or indorser), has been dishonoured by non-acceptance (or non payment), and we request immediate pay ment thereof, with expenses.
To John Jones, , Manager.
English Street, Leeds.
Where an inland bill has been dishonoured it may, if the holder think fit, be noted for non-acceptance or non-payment, as the case may be, but it is not necessary to note such a bill in order to preserve recourse against the drawer or indorsers neither is there any need to protest an inland bill, and it is not usually done. (See NOTING.) Where a foreign bill, appearing on the face of it to be such, has been dishonoured by non-acceptance, it must be duly protested for non-acceptance, and where such a bill, which has not been previously dishonoured by non-acceptance, is dishonoured by non payment, it must be duly protested for non payment. (See PROTEST). The bill must be noted on the day of dishonour. The protest may be extended later.
Noting or protest does not do away with the necessity of giving the notices of dis honour to drawer and indorsers. As soon
as payment is refused on the due date, a holder may give notice of dishonour. He need not necessarily wait till the end of the day before doing so. Where a bill is to be noted, it is customary to wait till after the close of business before noting it, though , there is nothing to prevent the bill being noted as soon as dishonoured. An action cannot be commenced till after the end of the due date. In Kennedy v. Thomas (1894, 2 Q.B. 759), where an action was brought by the holder of a dishonoured bill upon the last day of grace, it was dismissed as pre mature.
Where a bill, which a banker has dis counted for a customer, is dishonoured, the banker should debit it to the customer's account and advise him at once, so that he may be in time to give the required notices to prevent the release of other parties. But if the account does not justify the dis honoured bill being charged to it, the banker should debit it to an account called " Dis honoured Bills," or " Overdue Bills," and at once send notice of dishonour, and request for payment, to all the parties to the bill.
A note of the dishonour should be recorded in the discount ledger and the banker's opinion book.
1f a banker wrongfully dishonours a bill customer he wi, I be liable in an action by his or cheque for damages, and if he dishonours it because certain cheques paid to the credit of his customer, have not been cleared, he may also be held liable in damages if it has been the banker's practice to allow the customer to treat uncleared cheques as cash.
As it is a serious matter to damage a customer's credit by dishonouring a bill or cheque which ought to be paid, a banker will naturally make quite sure of the position before returning it. He should ascertain that everything has been credited to the account and that the balance has been correctly extended. When a cheque is returned simply from some irregularity in the document itself, such as an incorrect indorsement, an alteration, a difference in amount, or any other similar kind of cause, the banker should make the reason quite clear so that no reflection may be cast upon the customer's credit. A cheque marked " refer to drawer " means, as a rule, that the drawer has not sufficient funds in his account to meet it, and it would be wrong to mark a cheque " R /D " if the correct answer should be " Indorsement irregular," or something of that nature. (See ANSWERS.) It is customary (except where a special arrangement exists) to debit charges half- . yearly and until the usual time for debiting them has arrived a cheque should not be dishonoured by anticipating the item for charges, or debiting them at an unusual time.