Facts of the case
- B, a customer, issued a cheque.
- A, the banker, paid the cheque amount to the payee.
- The bank received the stop payment (countermanding) order after the cheque was already paid.
Issues in the case
- Whether the banker is liable for honoring the cheque when the stop-payment instruction was received later.
- Whether the timing of the countermand order affects the bank’s liability.
Principles associated with the case
- A cheque is a mandate from the customer to the bank to pay a specified amount to the payee.
- A customer has the right to countermand payment by issuing a stop-payment instruction before the cheque is cleared.
- However, once the cheque is paid in due course, the banker is discharged from liability if the payment was made in good faith and before receiving the countermand order.
- A banker is only liable if it makes a payment after receiving the stop-payment instruction.
Judgement
- The banker is not liable in this case as the cheque was paid before receiving the countermand order.
- The payment was made in due course as per the original mandate, and the bank acted in good faith.
- The countermand must be communicated and received by the banker before payment to hold the banker accountable.