Case Notes
Search results
Cheque – stop payment instruction – customer mistakenly instructed stop on wrong cheque – bank failed to make check on special answer request
Mr D bought a generator for his business and paid for it by way of two cheques numbered 24 and 25 respectively for an amount totalling approximately $35,000. Because of problems immediately experienced with the generator, Mr D instructed his bank to stop payment of the second of these two cheques. Unfortunately, in doing so, Mr D incorrectly noted the cheque to be stopped as number 26, instead of number 25. Whereas the payee details of cheques 24 and 25 were identical, cheque number 26 had been made out to someone entirely different. One day later the payee of cheque number 25 requested payment by special answer – a procedure to facilitate the urgent payment of cheques. In deciding whether to approve such a request, a bank is required to establish whether payment of the cheque in question has been stopped. Because it did not appear to Mr D’s bank that it had been instructed to stop payment of cheque number 25, that cheque was paid.
Later that same day, staff at Mr D’s branch became aware that cheque number 25 had been presented for payment, and that the details of the cheque specified in the stop payment request matched those of cheque number 25 in all respects, except for the cheque number. Bank staff called Mr D to clarify whether the correct cheque had been stopped, unaware that cheque number 25 had already been paid. Mr D then realised that he had placed a stop on the wrong cheque, and instructed the bank to stop cheque number 25. The bank later told Mr D that, because cheque number 25 had already been paid, it could no longer be stopped.
Mr D tried unsuccessfully to return the defective generator to the vendor, and then to sell it himself. He then claimed reimbursement of the amount of cheque number 25 (approximately $17,400) from the bank, claiming that it had failed to act on his instruction to stop payment. The bank declined Mr D’s claim, and his complaint was referred to my office.
Following an investigation, I found that the merits of the case were finely balanced. Whilst Mr D had clearly been at fault in giving the wrong cheque number when requesting the bank to stop payment, the bank had also been negligent when it, in fulfilling a special answer request in relation to cheque number 25, failed to notice that a stop payment request had been received for cheque number 26, with precisely the same date, payee and amount as cheque number 25, and had not then made further enquiries of Mr D.
In those circumstances, I considered it reasonable that each of the two parties should share half of the loss resulting from the payment of cheque number 25. This meant that the bank would have to reimburse Mr D for a sum of approximately $8,700. In addition, the bank had already offered to pay Mr D a sum of $1,000 for the inconvenience caused by incorrectly advising that cheque number 25 could be stopped, when it had already been paid by special answer.
After further negotiation between the bank and Mr D, the complaint was settled on this basis.