Dishonoured / Cancelled cheque

Sarginsons Law recently acted for a business client in a claim against a customer for cancelling a cheque. The law states that a cheque is as good as cash and as such once given to some as payment for goods or services should not be stopped. If the cheque is stopped then the person or company to whom the cheque was made payable can immediately issue proceedings against the debtor. In this particular case our client had provided services to a customer. When the work was completed the customer duly paid by cheque. However when our client tried to bank the cheque it was returned by the bank because it had been cancelled. They contacted the customer who said that he was experiencing problems with the equipment that had been installed and because of this he had cancelled the cheque. Our client tried to rectify the situation but after some weeks of discussion with the customer it was clear that he was making excuses about problems simply in order not to pay. The client sought advice from us. We advised on the procedure to issue a claim for a dishonoured or cancelled cheque. Before starting court proceedings a "notice of dishonour" must be sent to the person that cancelled the cheque. If this notice is sent to the debtor together with a solicitors letter stating that court proceedings will be started unless full payment is received this is often enough to get them to pay. However in this case the debtor still refused to pay so we issued court proceedings. After 14 days we applied to the court for Summary Judgement against the debtor. The debtor tried to argue at the hearing that he was not satisfied with our client's work. The only defence to a claim alleging that a cheque has been dishonoured or cancelled would be to allege fraud (i.e. the debtor didn't actually sign the cheque) or misrepresentation (debtor didn't realise what he was paying for). These defences are very difficult to prove and in reality are rarely ever successful. There is no statutory or other defence to a claim for cancelling a cheque (other than fraud or misrepresentation, which in reality are very rarely applicable) because by giving someone a cheque you are essentially promising them that you will pay them. We were able to obtain judgement for our client against the debtor customer. The advantage of this type of claim is that it is relatively quick and inexpensive and you do not open yourself up to counterclaims. The proceedings can be issued seven days after the "notice of dishonour" has been sent to the debtor. It is especially important for business owners to realise that this option is available to them. Although paying by cheque is becoming less popular and there is talk within government of phasing cheques they are still the most common form of payment for most businesses. Often starting a claim for the recovery of money in the County Court or High Court can be a long process but this type of claim is another option available to businesses and individuals. For any more information please contact Katie Kearns or Gerard Davis on 02476 553181