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Bank cheques - stopping - limited circumstances in which payment may be refused - bank cheque given to pay for car - finance owing on car - purchaser wanted to ensure clear title - arranged alternative payment for purchase price - requested cheque be stopped - cheque presented for payment - funds appeared in seller’s account - funds reversed out three days later
In March 2007 Mr K sold his car privately for $23,000, just before he was to relocate overseas. At the time of the sale the car was financed and $20,084.91 was owing to the finance company. The purchaser gave Mr K a bank cheque for the purchase price on 10 March, a Saturday. Mr K deposited the cheque with his bank on 12 March. The funds appeared in Mr K’s account that afternoon but were removed from the account on 15 March. Mr K was advised that the purchaser of the car had changed his mind about the bank cheque and cancelled it on 11 March. Payment by an alternative method was made on 12 March.
Mr K complained that by cancelling the bank cheque because the purchaser had changed his mind about the purchase, the bank had acted in breach of the Code of Banking Practice. Mr K wanted the cheque re-issued.
The bank responded by advising Mr K that the purchaser of the vehicle had not changed his mind about the purchase. He had requested that the bank cheque be cancelled because he was concerned to ensure that the finance company was paid so that he could obtain clear title.
The bank noted that on 12 March the purchaser contacted Mr K to advise that he had cancelled the bank cheque and to arrange for an alternative method of payment for the car. After communications between Mr K and the purchaser, a direct credit was made to the finance company, for the debt owing on the car, and a direct credit was made to Mr K, for the balance of the purchase price. The bank pointed out that re-issuing the bank cheque would result in unjust enrichment.
Mr K was unsatisfied with the bank’s response, and brought his claim to me.
Bank cheques may only be stopped in limited circumstances and cannot be stopped because someone has changed their mind about a transaction after handing the cheque over for payment. The bank ought not to have stopped the cheque in this case.
However, Mr K was not out of pocket as a result of the stopped cheque. He received his money as cleared funds and was able to draw against it on 13 March. Mr K’s bank had returned the funds to the bank that issued the cheque, after receiving confirmation that Mr K had received his monies by other means.
Whilst Mr K accepted that payment had been made by an alternative method he claimed that because this occurred more than 48 hours after the car had been taken away, he had to deal with the worry that the car had in effect been taken without proper payment. He said that instead of spending his last few days in New Zealand with friends, he had spent the majority of the time on the phone to his bank and the bank that had issued the bank cheque, causing him unnecessary stress and heartache.
After further discussions with Mr K and the bank, my investigator facilitated a settlement. The bank agreed to compensate Mr K $750 for inconvenience and provide him with a letter of apology.